Henry E. Smith

What Happened to Property in Law and Economics

This essay describes how the in rem nature of property has been largely ignored in the law-and-economics literature and argues that this omission leads to an incomplete view of property. We trace how, in this as in other respects, Coases famous article on social cost fundamentally altered the prevailing notion of property by focusing on property as a baseline for contracting or for collectively imposed resolutions of use conflicts. Like the Legal Realists, Coases article tends to view entitlements as arbitrary lists of use-rights that result from the resolution of use conflicts by courts or contracting parties. Three broad post-Coasean approaches - the contractarian, the tort, and the entitlement perspectives - are identified, in each of which the in rem nature of property is likewise suppressed. Finally, we briefly examine how four areas - the numerus clausus of property forms, the prevalence of certain in rem social norms, the direction of legal causation in resource conflicts, and the trespass-nuisance distinction - could be better explained by appealing to this in rem nature of property and the information costs to which it gives rise.

Exclusion versus Governance: Two Strategies for Delineating Property Rights

The delineation of property rights can follow two strategies that form the poles of a spectrum. In the exclusion strategy, rough proxies for use allow further individuation of use to be delegated to an owner. In the governance strategy, resource use is measured in terms of individual activities. Each strategy has its own characteristic cost structure. This theory, which is based on proxy measurement, refines the Demsetz thesis to allow for increased use of governance as well as exclusion. The theory also provides testable implications about the direction of expected change in exclusion and governance regimes and shifts among them. The proxy‐measurement theory is contrasted with an account that is based on rising resource values inducing more incursion and hence lower exclusion. A primary illustrative application is the rise of the open‐field system in England and the Demsetzian puzzle of the open fields both arising from and giving way to more exclusive ownership of parcels.

Semicommon Property Rights and Scattering in the Open Fields

A semicommons exists where property rights are not only a mix of common and private rights, but both are significant and can interact. The major example of a semicommons is the medieval open‐field system in which peasants owned scattered strips of land for grain growing but used the land collectively for grazing. The ownership structure allowed operation on a large scale for grazing and harnessed private incentives for grain growing. But a semicommons potentially leads to problems of strategic behavior that go beyond the familiar incentives to overuse a commons. In order to raise the costs of such behavior devices such as the scattering of strips may be used to mix up entitlements. Generally, boundary placement and norms are substitute methods of addressing strategic behavior in a semicommons. Among these solutions, scattering functions as a sanction for activities associated with strategic behavior.

Intellectual Property as Property: Delineating Entitlements in Information

This Article proposes that intellectual propertys close relationship to property stems from the role that information costs play in the delineation and enforcement of exclusion rights. As theorists have emphasized, the nonrivalness of information causes exclusive rights to be more costly in terms of forgone use than in the law of tangible property. But if intellectual property does not solve a problem of allocation to information, it can play a role in allowing those who find and develop information to appropriate the return from their rival inputs. It is on the cost side that exclusion emerges as a possible shortcut: exclusive rights in information are simple, indirect, and low-cost devices for solving the problem of appropriating the return from these rival inputs. Building on a framework that identifies exclusion and governance as complementary strategies for defining property rights, the Article derives some propositions about which factors can be expected to push toward and away from exclusion in delineating entitlements to information. The role that exclusion plays in keeping the system of entitlements over information modular - allowing information to be hidden behind metaphorical boundaries - is both its strength and its weakness. Because exclusion is both more costly and potentially more beneficial as interconnected information becomes more valuable, it is an empirical question whether we would expect more exclusion - and whether it would be desirable. The Article uses this information-cost theory to explain some of the basic differences between the more tort-like copyright regime and the more property-like patent law. The information-cost theory also has implications for suggestive sources of empirical evidence on structures of entitlements, such as rules within business organizations. Intellectual property, like property in general, can be seen as (at best) a second-best solution of a complex coordination problem of attributing outputs to inputs.

“Dative Sickness” in germanic

This paper approaches Case Theory through the problem of case alternations and case change. Two such alternations, Dative Sickness (or Substitution) and Nominative Substitution, are compared in Icelandic, German and Old English. The paper proposes a unification-based theory of case, which consists of three main constraints on the relation of NP properties and morphosyntactic realization: the Applicability Constraint, the Restrictiveness Constraint and the Linking Dissimilation Constraint. Given only the necessary device of optionality, exactly the desired alternations and their systematic limitations follow from general principles. The theory leads to a diachronic account of the changes as instances of analogy.

Making Coasean Property More Coasean

In his pioneering work on transaction costs, Ronald Coase presupposed a picture of property as a bundle of government-prescribed use rights. Not only is this picture not essential to Coase’s purpose, but its limitations emerge when we apply Coase’s central insights to analyze the structure of property itself. This leads to the Coase corollary: in a world of zero transaction costs, the nature of property does not matter to allocative efficiency. However, as with the Coase theorem, the real implication is for our world of positive transaction costs: we need to subject the notion of property to a comparative institutional analysis. Because transaction costs are positive, property is initially defined in terms of things, uses are grouped under exclusion rights, and in rem rights are widely employed. A more thoroughly Coasean approach points back to a picture of property more like the traditional one furnished by the law.

Research Handbook on the Economics of Property Law

Contents: Introduction Henry E. Smith 1. Property Rights, Land Settlement and Land Conflict on Frontiers: Evidence from Australia, Brazil and the US Lee J. Alston, Edwyna Harris and Bernardo Mueller 2. Commons, Anticommons, Semicommons Lee Anne Fennell 3. The Anticommons Lexicon Michael A. Heller 4. Private Property and Public Rights Thomas W. Merrill 5. Toward an Economic Theory of Property in Information Henry E. Smith 6. Unilateral Relinquishment of Property Lior Jacob Strahilevitz 7. Standardization in Property Law Henry E. Smith 8. Covenant Lite Lending, Liquidity, and Standardization of Financial Contracts Kenneth Ayotte and Patrick Bolton 9. The Personification and Property of Legal Entities George Triantis 10. Bankruptcy as Property Law Barry E. Adler 11. The Law and Economics of Marital Property Martin Zelder 12. Property Titling and Conveyancing Benito Arrunada 13. Land Demarcation Systems Gary D. Libecap and Dean Lueck 14. Servitudes Carol M. Rose 15. The Economics of Nuisance Law Keith N. Hylton 16. Acquiring Land Through Eminent Domain: Justifications, Limitations, and Alternatives Daniel B. Kelly 17. The Rest of Michelman 1967 William A. Fischel Index

Exclusion and Property Rules in the Law of Nuisance

This Article offers a theory of nuisance law based on information costs. Like trespass, much of the law of nuisance relies on a strategy of exclusion in which rights are defined using low-cost signals like boundary crossings that are only indirectly tied to particular uses. Nuisance law also supplements and fine-tunes this Blackstonian package of entitlements by means of a governance strategy, which relies on signals more directly tailored to particular uses. The information-cost advantage of strategies close to the exclusion end of the spectrum helps explain why, despite repeated calls for more balancing, nuisance law focuses on who caused invasions of whose land. Also consistent with an exclusion strategy are the staying power of traditional nonreciprocal notions of causation and the virtual nonexistence in nuisance of Rule 4 liability rules, under which plaintiffs would be permitted to invoke the law to force the polluter either to abate or shut down upon payment of the polluters damages. Applying Hohfeldian analysis, the Article shows that the common law gives polluters at most a privilege to pollute and that Rule 4 does not refine the basic exclusion regime but rather undermines it. The general question becomes when to soften exclusion with governance and the Article concludes by arguing that, in situations such as oil and gas fields and Boomer-style pollution cases with numerous victims, only small judicial governance-style safety valves are necessary, especially if legislative and administrative solutions are forthcoming. More generally, the information-cost theory of nuisance brings the utilitarian and corrective justice approaches to nuisance closer together. Nuisance law is not a mess or mystery but does contain within it the inflection point between exclusion and governance.

Community and Custom in Property

Community custom has played a limited but important role in the law of property. In addition to a few major historic examples such as mining camp rules and whaling, property law sometimes relies on community custom, for example in adverse possession, nuisance law, and beach access. This Article proposes an informational theory of custom in property law. Custom is subject to a communicative tradeoff in the law: all else being equal, informationally demanding customs require an audience with a high degree of common knowledge. General customs already known throughout society do not require much extra publicity from the law, and the law can easily draw on such customs. By contrast, customs that vary by community raise the question of the need for processing by non-expert audiences, i.e., outgroup dutyholders and government officials. This tradeoff helps explain the differential receptiveness to various customs and the process by which they are formalized if they are adopted into the law. The information-cost theory suggests that enthusiasts and skeptics of custom have both tended to ignore this process. The theory is then applied to some suggestive evidence from grazing customs and the pedis possessio doctrine in mining law, under which miners have pre-discovery rights to the spot being worked. Finally, the information-cost theory of custom sheds some light on the history and controversies over the numerus clausus (standardization and limitation of the set of basic property forms) and on the question of baselines of property entitlements in the law of takings.

Standardization in Property Law

Leading scholars in the field of law and economics contribute their original theoretical and empirical research to this major Handbook. Each chapter analyzes the basic architecture and important features of the institutions of property law from an economic point of view, while also providing an introduction to the issues and literature.