The property strategy

University of Pennsylvania Law Review

Volumn 160, Issue 7, 2012, Pages 2061-2095

  Merrill, Thomas W ^a  

^a School for International and Public Affairs   (United States)

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EID: 84864058037     PISSN: 00419907     EISSN: 19428537     Source Type: Journal    
DOI: None     Document Type: Review

References (88)

1. These descriptions of alternatives are skeletal and are not meant to be exhaustive. With respect to bureaucratic governance, for example, what I principally have in mind are government bureaucracies, such as the Bureau of Land Management, state highway commissions, and municipal public housing authorities. Obviously, there are many other types of hierarchical organizations that manage resources, including business corporations and nonprofit organizations like universities. See generally HENRY HANSMANN, THE OWNERSHIP OF ENTERPRISE (1996). I do not explore the many distinctions among different hierarchical organizations here, nor do I deny that from the perspective of an organization, its assets are typically held as a form of private property. Group consensus also covers a variety of subtypes, ranging from preliterate hunting clans to Israeli kibbutzim to cooperative apartment houses.
2. HUNTINGTON CAIRNS, LAW AND THE SOCIAL SCIENCES 59 (1935).
3. See Henry E. Smith, Property as the Law of Things, 125 HARV. L. REV. 1691, 1700-16 (2012) (discussing "the modularity of things and by extension the legal relations defined in terms of them").
4. Both ideas and cultural knowledge are excluded from intellectual property regimes. See, e.g., 17 U. S. C. § 102 (b) (2006) ("In no case does copyright protection⋯ extend to any idea,⋯ concept, principle, or discovery⋯.");
5. Russel L. Barsh, Grounded Visions: Native American Conceptions of Landscapes and Ceremony, 13 ST. THOMAS L. REV. 127, 141 (2000) ("[C]opyright only applies to new works by individual authors, not to old collective traditions, or 'folklore.'").
6. See Bd. of Regents v. Roth, 408 U. S. 564, 573-74 (1972) (discussing reputation as a liberty interest, not a property interest).
7. See Moore v. Regents of the Univ. of Cal., 793 P.2d 479, 489 (Cal. 1990) (holding that spleen cells were not the property of the patient from whom they were extracted).
8. Thomas W. Merrill, The Landscape of Constitutional Property, 86 VA. L. REV. 885, 900-07, 974-78 (2000).
9. See J. W. HARRIS, PROPERTY AND JUSTICE 50-51 (1996) (discussing how "cashable rights" "are treated as property");
10. J. E. PENNER, THE IDEA OF PROPERTY IN LAW 129-32 (1997) (discussing choses in action, a category of property encompassing company shares, bank balances, debts, and other negotiable instruments).
11. See Thomas W. Merrill, Introduction: The Demsetz Thesis and the Evolution of Property Rights, 31 J. LEGAL STUD. S331, S331 (2002) ("[P]roperty regimes are not static but change over time.");
12. see also Terry L. Anderson & P. J. Hill, The Evolution of Property Rights: A Study of the American West, 18 J. L. & ECON. 163, 164-68 (1975) (presenting "a theory of property rights evolution" expressed in terms of marginal benefits and costs).
13. See Carol Rose, The Comedy of the Commons: Custom, Commerce, and Inherently Public Property, 53 U. CHI. L. REV. 711, 723-30 (1986) (offering examples of and considering various rationales for open-access resources).
14. See, e.g., Missouri v. Holland, 252 U. S. 416, 431, 434 (1920) ("[Missouri] alleges a pecuniary interest, as owner of the wild birds within its borders⋯. Wild birds are not in the possession of anyone; and possession is the beginning of ownership⋯. [T]omorrow [they] may be in another State and in a week a thousand miles away.");
15. Pierson v. Post, 3 Cai. 175, 178 (N. Y. Sup. Ct. 1805) ("The⋯ authorities are decisive to shew, that mere pursuit, gave Post no legal right to the fox, but that he became the property of Pierson, who intercepted and killed him."). A number of commentators have suggested that an open-access resource like a fishery can be regarded as a form of community property.
16. See, e.g., Harold Demsetz, Toward a Theory of Property Rights, 57 AM. ECON. REV. 347, 354 (1967)
17. ("Communal ownership means that the community denies to the state or to individual citizens the right to interfere with any person's exercise of communally-owned rights."). Community property presents an interesting borderline case because, insofar as the community excludes outsiders and is governed by a welldefined and enforced set of norms, it is not inappropriate to describe the community as a manager and, therefore, to regard the arrangement as falling within the property strategy. As exclusion of outsiders weakens and norms become contested, such communities tend to look more like open-access regimes. The further a communityregulated resource falls toward the open-access end of the spectrum, the less plausible it is to regard it as being managed in any meaningful sense, and hence to regard it as following the property strategy. See generally Thráinn Eggertsson, Open Access Versus Common Property, in PROPERTY RIGHTS: COOPERATION, CONFLICT, AND LAW 73, 86 (Terry L. Anderson & Fred S. McChesney eds., 2003).
18. See Joseph D. Kearney & Thomas W. Merrill, The Origins of the American Public Trust Doctrine: What Really Happened in Illinois Central, 71 U. CHI. L. REV. 799, 801-03 (2004).
19. See, e.g., Golan v. Holder, 132 S. Ct. 873, 882 (2012).
20. See, e.g., A. S. DIAMOND, PRIMITIVE LAW PAST AND PRESENT 82-83, 87 & n. 3, 112 (1971) (noting that in ancient Babylonian law "the father of the family⋯ [became] the legal owner of all its property", in ancient Chinese law "the wife owned no⋯ property", and in ancient Indian law the wife also had no property (citations omitted)).
21. See generally Richard H. Chused, Married Women's Property Law: 1800-1850, 71 GEO. L. J. 1359, 1384-412 (1983) (tracing the development of married women's property acts in both England and the United States);
22. Ben Griffin, Class, Gender, and Liberalism in Parliament, 1868-1882: The Case of the Married Women's Property Acts, 46 HIST. J. 59, 62-83 (2003) (chronicling the reform in British law brought about by the Married Women's Property Acts).
23. Thomas W. Merrill, Property and the Right to Exclude, 77 NEB. L. REV. 730, 731 (1998).
24. JEREMY WALDRON, THE RIGHT TO PRIVATE PROPERTY 39 (1988) ("The owner of a resource is simply the individual whose determination as to the use of the resource is taken as final⋯.").
25. See HANOCH DAGAN, PROPERTY: VALUES AND INSTITUTIONS 37 (2011) (conceding that "every property right involves some power to exclude others from doing something").
26. *2 ("[P]roperty [is] that sole and despotic dominion which one man claims and exercises over the external things of the world, in total exclusion of the right of any other individual in the universe.");
27. cf. Morris R. Cohen, Property and Sovereignty, 13 CORNELL L. Q. 8 (1927) (developing the analogy between ownership and sovereignty).
28. See, e.g., Larissa Katz, Exclusion and Exclusivity in Property Law, 58 U. TORONTO L. J. 275, 278 (2008).
29. Something similar to my two prerogatives has been recognized by what is sometimes called the "property rights" theory of the business firm. According to this account, the owners of a business firm (the shareholders) have two key entitlements: the power to make residual control decisions and the right to receive residual financial flows. See PAUL MILGROM & JOHN ROBERTS, ECONOMICS, ORGANIZATION AND MANAGEMENT 288-93 (1992) (introducing the concepts of residual control and residual returns);
30. Oliver Hart & John Moore, Property Rights and the Nature of the Firm, 98 J. POL. ECON. 1119, 1120-21 (1990) (same);
31. see also Sanford J. Grossman & Oliver D. Hart, The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration, 94 J. POL. ECON. 691, 716 (1986) ("Ownership is the purchase of⋯ residual rights of control."). Bob Ellickson has extended this analysis from the business firm to the household.
32. See ROBERT C. ELLICKSON, THE HOUSEHOLD: INFORMAL ORDER AROUND THE HEARTH 60-64 (2008). My account extends this analysis further, with modifications, to property rights more generally.
33. Armen Alchian may have been the first to perceive this feature of the property strategy. He described property rights as "a method of assigning to particular individuals the 'authority' to select, for specific goods, any use from a nonprohibited class of uses." ARMEN A. ALCHIAN, ECONOMIC FORCES AT WORK 130 (1977) (emphasis added).
34. What I am characterizing as "subtractions" from owner managerial authority can also be regarded as alternative methods of delineating property rights. See Henry E. Smith, Exclusion Versus Governance: Two Strategies for Delineating Property Rights, 31 J. LEGAL STUD. S453, S454-55 (2002) (arguing that property "rights fall on a spectrum between the poles of exclusion and governance", and that in addition to the issue of who can exclude whom, we must attend to "a wide range of rules, from contractual provisions, to norms of proper use, to nuisance law and public environmental regulation" that limit the property right in question).
35. See Thomas W. Merrill & Henry E. Smith, What Happened to Property in Law and Economics?, 111 YALE L. J. 357, 375-84 (2001) (criticizing the list-of-uses conception of property adopted in post-Coasean law and economics as "lead[ing] to an incomplete picture of property").
36. See, e.g., Sharon LaFraniere et al., China Reins In Entertainment and Blogging, N. Y. TIMES, Oct. 27, 2011, at A1 (discussing examples of Internet and media censorship in China);
37. Edward Wong, Beijing Imposes New Rules on Social Networking Sites, N. Y. TIMES, Dec. 17, 2011, at A9 (same).
38. For a discussion of the wide range and ubiquity of accessionary rights, see Thomas W. Merrill, Accession and Original Ownership, 1 J. LEGAL ANALYSIS 459, 462-74 (2009).
39. See, e.g., YORAM BARZEL, ECONOMIC ANALYSIS OF PROPERTY RIGHTS 3-9 (2d ed. 1997).
40. See TRIMBLE R. HEDGES, FARM MANAGEMENT DECISIONS 17-20, 91-94, 327-29, 528 (1963) (recognizing that farmers are subject to government regulation of pesticide use, the common law of property and contract, controls that accompany government subsidies, employment rules promulgated by regulatory agencies, and social customs);
41. PENN STATE UNIV., COLL. OF AGRIC., THE FARM MANAGEMENT HANDBOOK 7 (George L. Greaser ed., 1991) (discussing farmers' contractual duties to parties who supply necessary inputs);
42. G. F. WARREN, FARM MANAGEMENT 525 (1914) ("One's success is very largely controlled by the community.").
43. See, e.g., JOHN LOCKE, TWO TREATISES OF GOVERNMENT 305 (Peter Laslett ed., Cambridge Univ. Press 1960) (1690) ("[T]he wild Indian⋯ knows no Inclosure, and is still a Tenant in common⋯.");
44. HENRY SUMNER MAINE, ANCIENT LAW 124-32 (Peter Smith ed., 1970) (1861) (conjecturing that private property evolved out of common or communal property).
45. Extremely primitive hunter-gatherer clans may have had little sense of individual possession, in part because they put a premium on being able to travel light. See MARSHALL SAHLINS, STONE AGE ECONOMICS 9-14 (1972). Others have surveyed the anthropological understanding of property among more advanced preliterate societies.
46. See, e.g., Martin J. Bailey, Approximate Optimality of Aboriginal Property Rights, 35 J. L. & ECON. 183 (1992);
47. see also MELVILLE J. HERSKOVITS, ECONOMIC ANTHROPOLOGY 350-70 (1952) (describing land tenure in various agricultural societies);
48. E. ADAMSON HOEBEL, THE LAW OF PRIMITIVE MAN 46-63 (1954) (applying "fundamental legal concepts" to the study of the "law" of primitive societies).
49. See MARCEL MAUSS, THE GIFT: FORMS AND FUNCTIONS OF EXCHANGE IN ARCHAIC SOCIETIES 17-45 (Ian Cunnison trans., 1954) (analyzing the history and function of gifts in primitive societies);
50. Richard A. Posner, A Theory of Primitive Society, with Special Reference to Law, 23 J. L. & ECON. 1, 16-19, 24-25 (1980) (same).
51. WILLIAM CRONON, CHANGES IN THE LAND: INDIANS, COLONISTS, AND THE ECOLOGY OF NEW ENGLAND (1983).
52. see also Robert C. Ellickson, Property in Land, 102 Yale L. J. 1315, 1399 (1993) (reporting a "'universally applicable' cultural rule that a crop is the private property of the individual, household, or narrow kinship line that has cultivated it" (citation omitted)).
53. See 1 JEREMY BENTHAM, THEORY OF LEGISLATION 146-47 (Étienne Dumont ed., Charles Milner Atkinson trans., 1914) (1802) ("Property and law were born together, and would die together. Before the laws property did not exist; take away the laws, and property will be no more.").
54. See, e.g., JAMES M. ACHESON, THE LOBSTER GANGS OF MAINE 71-83 (1988) (documenting informal allocations of rights among lobster fishermen);
55. ROBERT C. ELLICKSON, ORDER WITHOUT LAW: HOW NEIGHBORS SETTLE DISPUTES 40-64 (1991) (documenting informal norms that control cattle-trespass disputes).
56. See THOMAS W. MERRILL & HENRY E. SMITH, PROPERTY: PRINCIPLES AND POLICIES ch. XI (2007) (discussing the varieties of government forbearance to promote security of property).
57. For the idea of a bandit state, see MANCUR OLSON, POWER AND PROSPERITY: OUTGROWING COMMUNIST AND CAPITALIST DICTATORSHIPS 10-11 (2000).
58. See MAURICE J. MEISNER, MAO'S CHINA AND AFTER 420 (3d ed. 1999) ("[I]t was precisely the absence of private ownership of the means of production that came to crucially define Chinese society only a few years after the Communist victory of 1949.");
59. RICHARD PIPES, RUSSIA UNDER THE BOLSHEVIK REGIME 386-403 (1993) ("[L]ocal officials⋯ felt at liberty to appropriate food, cattle, even clothing for their personal use⋯. The system operated on the absurd principle that the more the peasant produced the more would be taken from him⋯." (footnotes omitted)).
60. Potter v. Couch, 141 U. S. 296, 315 (1891);
61. accord JOHN CHIPMAN GRAY, RESTRAINTS ON THE ALIENATION OF PROPERTY § 105 (Boston, Boston Book Co., 2d ed. 1895).
62. These sorts of compulsory exchanges of property typically go by the name "economic development" and are controversial. See generally Janice Nadler et al., Government Takings of Private Property (describing public attitudes toward economic development takings), in PUBLIC OPINION AND CONSTITUTIONAL CONTROVERSY 286 (Nathaniel Persily et al. eds., 2008).
63. See F. A. Hayek, The Use of Information in Society, 35 AM. ECON. REV. 519, 526 (1945) (arguing that when knowledge of relevant facts is dispersed among many people, the pricing system will effectively coordinate economic activity);
64. see also LUDWIG VON MISES, HUMAN ACTION: A TREATISE ON ECONOMICS 694-711 (Ludwig von Mises Inst. 1998) (1949) (arguing that human planning and cooperation are best optimized by a system that relies on the efforts of individual actors without centralized management).
65. See The World Factbook: Country Comparison: GDP - Per Capita (PPP), CENT. INTELLIGENCE AGENCY, https://www.cia.gov/library/publications/the-world- factbook/rankorder/2004rank.html (last visited Apr. 15, 2012) (estimating that as of 2011, the GDP per capita of South Korea was $31, 700, whereas the GDP per capita of North Korea was $1800).
66. See Edgar Bodenheimer, The Case Against Natural Law Reassessed, 17 STAN. L. REV. 39, 41-42 (1964) (chronicling the history of various natural and common law doctrines and noting that "private property in some articles of personal consumption, such as tools and clothing, is almost universally recognized").
67. BARBARA DEMICK, NOTHING TO ENVY: ORDINARY LIVES IN NORTH KOREA 14, 52 (2009).
68. Int'l News Serv. v. Associated Press, 248 U. S. 215, 239-40 (1918).
69. See, e.g., Douglas L. Kruse, Profit Sharing and Productivity: Microeconomic Evidence from the United States, 102 ECON. J. 24, 29-36 (1992) (concluding that profit-sharing plans generally increase managerial effort).
70. See generally Garrett Hardin, The Tragedy of the Commons, 162 SCIENCE 1243 (1968) (addressing the inherent problems in common-rights resource management in an increasingly overpopulated world).
71. ELINOR OSTROM, GOVERNING THE COMMONS: THE EVOLUTION OF INSTITUTIONS FOR COLLECTIVE ACTION 8-23 (1990).
72. See generally JAMES M. BUCHANAN & GORDON TULLOCK, THE CALCULUS OF CONSENT: LOGICAL FOUNDATIONS OF CONSTITUTIONAL DEMOCRACY 97-98, 111-12 (1965) (noting the higher costs of making a decision associated with supermajority or unanimity rules).
73. See Henry Hansmann, Condominium and Cooperative Housing: Transactional Efficiency, Tax Subsidies, and Tenure Choice, 20 J. LEGAL STUD. 25, 34-37 (1991) (discussing the high costs of collective decisionmaking in common interest communities).
74. See, e.g., 1 ADAM SMITH, AN INQUIRY INTO THE NATURE AND CAUSES OF THE WEALTH OF NATIONS 162-67 (Edwin Cannan ed., Univ. of Chi. Press 1976) (1776).
75. See MILTON FRIEDMAN, CAPITALISM AND FREEDOM 15 (1962) ("The preservation of freedom requires the elimination of [the] concentration of power to the fullest possible extent and the dispersal and distribution of whatever power cannot be eliminated-a system of checks and balances.").
76. See Charles A. Reich, The New Property, 73 YALE L. J. 733, 772 (1964) ("Like the Bill of Rights, property represents a general, long range protection of individual and private interests⋯.").
77. Margaret Jane Radin, Property and Personhood, 34 STAN. L. REV. 957 (1982).
78. ERVING GOFFMAN, ASYLUMS 18-21, 28, 48-49 (1961).
79. See Daniel B. Kelly, Strategic Spillovers, 111 COLUM. L. REV. 1641, 1642-44, 1649-51 (2011) (defining and analyzing negative externalities).
80. Of course, social norms or Coasean bargains may sometimes internalize these and other externalities. See Steven N. S. Cheung, The Fable of the Bees: An Economic Investigation, 16 J. L. & ECON. 11, 12-13 (1973) (explaining that beekeepers often contract with neighboring apple farmers).
81. See 1 HERBERT HOVENKAMP, Ip And Antitrust: An Analysis Of Antitrust Principles Applied To Intellectual Property Law §§ 1.3, 4.2 (2002).
82. See STUART BANNER, Who Owns The Sky?: The Struggle To Control Airspace From The Wright Brothers On 291-93 (2008) (Discussing The Transaction Cost Problem Associated With Navigable Airspace).
83. SEE THOMAS W. MERRILL, Private Property And Public Rights (Surveying Legal Doctrines Relating To Public Domain, Public Streets, Highways, Airspace, And Public Use Takings), In Research Handbook On The Economics Of Property Law 75, 77-80 (Kenneth Ayotte & Henry E. Smith eds., 2011).
84. See, e.g., United States v. Causby, 328 U. S. 256, 260-61 (1946) ("The air is a public highway, as Congress has declared⋯. Common sense revolts at the idea [of] private claims to the airspace⋯.").
85. See 47 U. S. C. § 301 (2006) (declaring "the control of the United States over all channels of radio transmission").
86. See THE BEVERLY HILLBILLIES (20th Century Fox 1993).
87. PIERRE-JOSEPH PROUDHON, WHAT IS PROPERTY? 13 (Donald R. Kelly & Bonnie G. Smith eds. & trans., 1994) (1840).
88. KARL MARX & FREDERICK ENGELS, THE COMMUNIST MANIFESTO 84 (John E. Toews ed., Bedford/St. Martin's 1999) (1848) (predicting that advanced countries would begin to see the abolition of property).