Thomas W. Merrill

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.

The Influence of Amicus Curiae Briefs on the Supreme Court

INTRODUCTION AND OVERVIEW ............................................................ 744 I. THE RISING TiDE OFAMICUS CuRIAE BRIEFS .................................. 751 A. The Level ofAmicus Curiae Activity, 1946-1995 ........................... 751 B. Citation and Quotation of Amicus Briefs, 1946-1995 .................... 757 II. THE OPEN DOOR POLiCYTOWARD AMICUS BRIEFS ........................ 761 III. PREVIOUS STUDIES OF THE INFLUENCE OF AMICUS BRIEFS ON SUPREME COURT OUTCOMES ........................................ 767 IV. THREE MODELS OFJUDGING AND THEIR IMPLICATIONS FOR AMICUS BRIEFS ......................................................................... 774 A. The Legal M odel .......................................................................... 775 B. The Attitudinal Model ................................................................. 779 C. The Interest Group Model ............................................................. 782 V. AN EMPIRICAL STUDY OF THE INFLUENCE OFAMICUS BRIEFS ......... 787 A. The Overall Success Rates ofAmicus Filers ..................................... 789 B. Disparities in Amicus Support ....................................................... 793 C. The Impact of Amicus Brief Quality .............................................. 801 1. Success Rates of Institutional Litigants ............................... 801 2. Success Rates of Cited Briefs ............................................... 811

Introduction: The Demsetz Thesis and the Evolution of Property Rights

Both conventional price theory and standard economic accounts of tort and contract law assume fixed property rights. In fact, however, property regimes are not static but change over time. Given the assumption of fixed property that otherwise prevails in economic literature, explaining the evolution of property rights is one of the great challenges for the economic analysis of law. The point of departure for virtually all efforts to explain changes in property rights is Harold Demsetz’s path-breaking article, “Toward a Theory of Property Rights.” The article is still widely cited and reproduced, especially in first-year property courses in law schools. Yet for all its deserved fame, the article contains at best a sketch of a theory and offers only anecdotal evidence by way of support. On April 21–22, 2001, the conference The Evolution of Property Rights was held at Northwestern University School of Law. The purpose of the conference was to reexamine the Demsetz thesis, consider possible alternatives or elaborations to it, and develop further empirical evidence either to confirm or disconfirm it. The articles in this volume, including an afterword by Demsetz, are the outgrowth of the papers presented at that conference. The Demsetz thesis can be seen as an anticipation of the idea that the common law evolves toward efficient rules. Demsetz hypothesized that property rights emerge when the social benefits of establishing such rights exceed their social costs. In effect, he suggested that legal rules regarding resources change over time along a path that produces net benefits to the relevant community. Demsetz broadly described the benefits of creating new types of property in terms of the internalization of externalities. On closer examination, we can see that he actually made three distinct arguments about the benefits of property, each presented in the language of externalities. First, following Jeremy Bentham, Demsetz noted that property provides

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.

Golden Rules for Transboundary Pollution

Environmental law is becoming ever more centralized. In the United States, state and local pollution laws have been eclipsed by federal regulation. In the European Community, and to a lesser degree under the North American Free Trade Agreement (NAFTA), national controls have been supplemented by regional regulation. And the growing importance of treaties regulating particular aspects of the global environment has reinforced calls for more general regimes of international environmental regulation.

The Origins of the American Public Trust Doctrine: What Really Happened in Illinois Central

Introduction ......................................................................................................... 800 I. The Standard Illinois Central Narrative .................................................. 805 II. Setting the Stage ........................................................................................ 811 A . The Lay of the Land ......................................................................... 811 B. Legal Uncertainty over Property Rights in Submerged Lands....826 C. Implications for the Lakefront ........................................................ 836 III. 1867: The Lakefront in Play ...................................................................... 838 IV. 1868: Debating the Future of the Lakefront ........................................... 842 V. 1869: Chicago and the Illinois Central Go to Springfield ...................... 853 A. A Note on Newspapers and State Legislatures in the M id-N ineteenth Century .................................................................. 853 B. The Lake Front Act of 1869 ............................................................. 860 C. The Motives of the Illinois Central ................................................. 877 D . The Public Interest ............................................................................ 881 E. The Question of Corruption ............................................................ 887 V I. A fter the A ct .............................................................................................. 894 A. 1869-1870: North Lake Park ............................................................ 895 B. 1870-1872: The Outer Harbor ......................................................... 900 C . 1873: R epeal ....................................................................................... 905 V II. The Lake Front Case ................................................................................. 912 VIII. What Illinois Central Really Tells Us about the Public Trust D octrine ................................................................................ 924 C onclusion ........................................................................................................... 930

Agency Rules with the Force of Law: The Original Convention

INTRODUCTION ................................................................................. 470 I. WHY THE MEANING OF RULEMAKING GRANTS MATTERS ................................................. 476 II. TEXTUALIST INTERPRETATION OF FACIALLY AMBIGUOUS RULEMAKING GRANTS ...... 481 A. Language ................................................................... 482 B. Structure ................................................................... 483 C. Canons of Interpretation ................................................................... 487 i. The Rule of Lenity ................................................................................. 487

Direct Voting by Property Owners

Direct voting by property owners is a widespread but controversial tool for resolving disputes over local collective goods. Direct voting has powerful advantages, in that it can harness the superior knowledge of many local minds, resolve controversies in a way that is perceived to be legitimate, and eliminate corrupt dealmaking. But it also has serious pitfalls, if local voters are poorly informed, or if they ignore external effects on other communities, or if the process is distorted by majoritarian or minoritarian bias. To capitalize on the advantages of local voting, and minimize the risks, this Article proposes that direct voting be limited to local property owners, in a one-owner, one-vote fashion. The issues chosen for resolution by direct voting should also be ones with uniform high stakes for property owners, and minimal spillover effects outside the voting community. Applications to controversies over the creation of local historic districts and the use of eminent domain for economic development are discussed.

Article III, Agency Adjudication, and the Origins of the Appellate Review Model of Administrative Law

American administrative law is grounded in a conception of the relationship between reviewing courts and agencies modeled on the relationship between appeals courts and trial courts in civil litigation. This appellate review model was not an inevitable foundation of administrative law, but it has had far-reaching consequences, and its origins are poorly understood. This Article details how the appellate review model emerged after 1906 as an improvised response by the U.S. Supreme Court to a political crisis brought on by aggressive judicial review of decisions of the Interstate Commerce Commission. Once the jeny-built model was in place, Congress signaled its approval, and an academic-John Dickinson-wrote a persuasive book extolling its virtues. As a result, the appellate review model became entrenched by the 1920s and eventually spread to all of administrative law. The early adoption of the appellate review model helps explain why the Supreme Court never seriously grappled with Article III problems created by the widespread use of administrative agencies to adjudicate cases once the New Deal and the expansion of the administrative state arrived. It also helps explain why the judiciary has played such a large role in the development of administrative policy in the United States relative to other legal systems. INTRODUCTION . .................................................. 940 I. NINETEENTH-CENTURY BACKGROUND ........................... 946 II. THE EMERGENCE OF THE APPELLATE REVIEW MODEL ........ 953 A. The ICC Crisis ....................................... 953 B. The Hepburn Act .................................... 955 C. Strategic Retreat ..................................... 959 D. The Source of the Appellate Review Model ........... 963 * Charles Evans Hughes Professor of Law, Columbia Law School. The Article has benefited from comments by participants in workshops at Chicago, Columbia, Minnesota, and Vanderbilt Law Schools. Special thanks to Charles McCurdy,Jerry Mashaw, and Henry Monaghan for their interest and input. Brad Lipton and Brantley Webb provided valuable research assistance. Some of the material in this Article appears in abbreviated form in Thomas W. Merrill, The Origins of American Style Judicial Review, in Comparative Administrative Law 389 (Susan Rose-Ackerman & Peter L. Lindseth eds., 2011).

Private Property and the Politics of Environmental Protection

Private property plays two opposing roles in stories about the environment. In the story favored by most environmentalists, private property is the bad guy. (1) It balkanizes an interconnected ecosystem into artificial units of individual ownership. Owners of these finite parcels have little incentive to invest in ecosystem resources and every incentive to dump polluting wastes onto other parcels. Only by relocating control over natural resources in some central authority like the federal government, can we make integrated decisions designed to preserve the health of the entire ecosystem. For these traditional environmentalists, private property is the problem; public control is the solution. There is a counter story, told by the proponents of what is sometimes called free market environmentalism. (2) In this story, private property is the good guy. Environmental degradation is a problem because of incomplete property rights. If all resources were privately owned, then no one would be able to impose externalities on anyone else; potential polluters would have to purchase the right to pollute first. Similarly, if all resources--including habitats of endangered species and other ecologically sensitive resources--were privately owned, then owners would have incentives to invest in the preservation of these resources, and would use their ingenuity to get persons who care about environmental protection to pay for it. For free market environmentalists, public control of resources is the problem; private property is the solution. Both sides in this debate are only half right. The traditional environmentalists are closer to the mark in their diagnosis of the problem. Property rights are always and inevitably incomplete, as it is costly to set up and enforce any system of private property. Because property rights are incomplete, owners of resources that are subject to private ownership--such as parcels of land devoted to productive uses--will always have incentives to disregard the costs they impose on common resources that are not subject to private ownership. Sometimes creating new types of property rights can help the situation; more often, however, the only cost-effective solution to these sorts of spillovers is government regulation. On the other hand, the free market environmentalists are closer to the mark in devising a solution to the problem. Missing from the traditional account is any credible theory of how we can generate collective action to protect sensitive ecosystem resources. Bursts of collective altruism do happen, but they are difficult to sustain. Witness the history of socialism, or, more pertinently the history of environmentalism. (3) What is needed is an institutional arrangement that generates private incentives supporting collective action that will protect the environment. The best such arrangement is the widespread private ownership of land. In this sense, the free market environmentalists are closer to the mark in their prescription of a cure than are the traditional environmentalists, with their call for a bigger government. I. Casual empiricism strongly suggests that private property is good for the environment. Eastern Europe in the 1980s offered a kind of natural experiment about the effects of different property regimes. (4) An iron curtain ran through Eastern Europe from the Baltic to the Mediterranean. West of the line, real property was predominately subject to private ownership. East of the line, real property was owned by the state. The results were plain for all to see: while towns and villages on the west side were typically neat and clean, with well-scrubbed streets and colorful boxes of flowers in the windows, towns and villages on the east side were drab and dirty, with plaster falling off the walls and no flowers to be seen anywhere. These paired communities were generally composed of buildings of the same vintage and style of construction and were populated by families having the same ethnic background and cultural traditions. …