Property Law Outline - Possession, the Commons, and the Environment

1. Types of Arguments in Property
1. Labor Theory
1. When you put your labor into something and make it useful, it becomes yours.
2. Based on the assumption that you own yourself and your labor.
3. Issues: How much labor is required? What about ideas? What if you added to the value of property that already belonged to someone else? What about competition? Conservation?
2. Utilitarian/Efficiency
1. Most productive use of resources.
2. Also called instrumental approach.
1. Ask: What are we trying to accomplish through this rule.
3. Rule of Capture
1. A person who first captures otherwise unowned resources is entitled to those resources.
2. First-in-time rule often applied to conquest.
4. Custom
1. Look back into history to see how this type of dispute has traditionally been handled.
2. Can also involve submitting dispute to some type of arbitration board that would better be able to resolve the dispute according to group customs (see Pierson v. Post).
5. Equity/Fairness
1. Social policy dictates the most fair allocation of resources.

 

2. Property as a Bundle of Sticks
1. Six traditional "sticks" of property:
1. The right to possess
2. The right to exclude
3. The right to transfer
1. Alienable property is property that can be sold.
4. The right to use
5. The right to enjoy fruits
6. The right to alter
2. There are both rights and burdens associated with property ownership.

 

3. Property Law and Social Policy
1. Often, property is less about the actual thing itself and more about social policy.
2. Enforcement of property norms:
1. Can have customary enforcement and/or enforcement by the State.
2. Institutions- supporting structure around the rules of property.
1. Institutions include:
1. Norms
2. Public legal rules (enforced by courts)
3. Markets
4. Political institutions
2. Different types of institutions can enforce similar rules.
3. Ex: Colonists and Indians used different institutions to enforce similar rules
1. Title (Land)
1. Indians- sachem holds title for the village, but no individual land title.
2. Colonists- crown holds title; Mass Bay Corp. holds title; OR individuals/groups hold title.
2. Nature of Property Rights (Land)
1. Indians- usufructory rights; had the right to use the land in a certain way.
2. Colonists- despotic dominion; could do whatever they wanted w/ the land.
3. Issue between them was with certain types of rights in the bundle of sticks:
1. Colonists could transfer land, but Indians only could transfer usufructory (use) rights.
2. Colonists had the absolute right to exclude, but Indians could only exclude based on use.
3. Colonists had the absolute right to possess, but Indians only had the  right to possess for a short time.
4. Disputes arose because Indians thought that they were transferring the right to use and possess the land for a time (2 sticks), but colonists thought they were getting the whole bundle of sticks.
3. Nature of Property Rights (Objects)
1. Indians- had claim over things that they made and that were practical.  Didn't want a lot of goods because they moved.
2. Colonists- object ownership was more important and could accumulate.
4. Note: Reliance by colonists on cows and pigs (which have to be contained on land) changed the economy and thus the rules on property.  Indians relied on wild animals, and thus usufructory rights were sufficient.
3. Three systems to govern land:
1. Decentralized Private- private owner has all rights.
2. Centralized (communism)- gov't owned, individuals have use rights.
3. Communalism- community owned, individuals have use rights.
4. Proper allocation of property:
1. Ask: Does this method allocate the property in the best way?
2. Considerations:
1. Fair competition
1. Competition should be fair so as to attract more people into the industry or pursuit.
2. Ex: Keeble v. Hickeringill (SUPP)
1. P had decoy duck pond, and lured ducks off D's land with his pond. D shot a gun near P's pond on several occasions to scare P's ducks onto D's pond. 
2. Court held that D owed P for the ducks because D unfairly competed with P by shooting the gun.  Luring the ducks by creating a more appealing decoy pond, however, was fair competition.
2. Efficiency
3. Transaction Cost
1. Rule v. Standard:
1. Rules are easier to define, and thus have lower transaction costs, but are less fair on the margins.
2. Standards are more difficult to define and have higher transaction costs, but are more fair on the margins.
2. Ex: Pierson v. Post (p.94) Capture (majority) is more of a rule.  Pursuit (dissent) is more of a standard.  Court opts for the rule here.
5. Relational Nature of Property- property rights are often not absolute, but relational.
1. It only makes sense to examine a person's property right over something in relation to another person's right over that same thing.
2. Ex: Property right of your spot in line for a sporting event is only relevant because there are people in front of you and behind you.

 

4. Property and the Commons
1. Why do we have commons? (Three reasons)
1. Basic physical nature of the resource is such that it cannot be privatized.
2. It is not cost effective to privatize the resource.
1. Note that technology is very important to privatization. (e.g. Barbed wire, encryption)
3. Societal importance of the resource is such that we don't want to privatize (e.g. waterways).
2. Governing the Commons
1. Three types of commons:
1. Open access commons (everyone has access)
2. Communal access commons (everyone in community has access)
1. Preconditions for a Communal Property Regime:
1. Closed community of users
2. Efficient monitoring
3. Shared norms
4. Clear boundaries
5. Reciprocity of sanctions (each member of the community has to have the ability to sanction against everyone else).
1. Also need clear gradation of sanctions.
2. CPRs break down when:
1. Outsiders come in,
2. Technology advances, or
3. New markets are created.
3. Pay-to-access commons
1. One example of this is a state park that requires payment of a fee to enter.
2. When determining which type of commons and rule for governing commons is best, consider:
1. Efficiency
2. Safety
3. Certainty
4. Clear Rule
5. What is the goal?
6. Incentive to reinvest in the resource
1. Depends on the nature of the resource. For example, this is an important consideration with oysters but not with whales.
3. Tragedy of the Commons: when you have an open access commons, the resource is depleted faster because individual incentives to deplete the resource are greater than individual incentives to invest in the resource.
1. Two issues:
1. Pricing is wrong
1. There is no price put on public goods, and therefore there is no market signal that there are externalities.
2. Answer: internalize the externalities.
2. Negative externalities are subsidized
1. For example, in the past, fisherman have actually been paid to do things that are negative and deplete the resource.
2. Ways to solve the tragedy of the commons:
1. Prescriptive Regulation- only allow X number of people to enter the commons or X number of goods to be extracted.
1. Command and control government regulations.
2. Need: accurate info, enforcement.
2. Property Rights System (combo of prescriptive regulation and privatization)
1. Ex: cap-and-trade.
2. Create extracted rights for a resource. Then, you can only use the resource if you have the right.
3. Right can be traded, which promotes efficiency.
4. Total number of allowances (rights) on the market should be at sustainable levels.
3. Privatization
4. Penalties - impose taxes on the use of the resource.
1. In the ideal world, taxes would be equal to the cost of externalities.
5. Payments/Subsidies - reward behavior you like.
6. Persuasion - market information (softest form).
3. Assumptions re: tragedy of the commons:
1. People act in their own best interest.
2. There is open access.
3. The resource is finite.
4. There is a collective action problem.
5. There are no effective norms.
3. Common-type Properties
1. Wild Animals
1. Wild animals on common lands belong to the captor, but capture is required, not just mere pursuit.
2. Ex: Pierson v. Post (1805) (p.94)
1. Takes place in a common access area. Rule of capture governs.
2. Post pursued fox, Pierson kills fox.
3. Court holds, through formalistic argument drawing on old authorities (custom), that mortal wounding or capture of the animal is required in order to possess it.
1. Also argues that transaction costs are lowered through rule of capture (instrumental argument).
4. Dissent argues, also formalistically, that the issue should have been submitted to the arbitration of sportsmen (different kind of custom argument).
1. Dissent also uses labor theory.
2. Dissent also considers the fact that society wants foxes to be caught (instrumental).
3. It is important to note that conservation of wild animals has not historically been a goal of the courts, which operated under the assumption that the supply of wild animals was plentiful.
2. Oil and Natural Gas (p.99)
1. Often characterized as "fugitive" resources, analogous to wild animals, by courts.
1. Capture could take place on the commons or on private land because of this.
2. Historically, the rule of capture applied in order to encourage extraction. (from Westmoreland and Cambria v. De Witt (1889))
1. Person A could drill down in his own land and extract oil that was in a reservoir under Person B's land.  However, Person A could not drill under B's land.
2. However, this does not necessarily encourage efficient extraction, because it results in a race to extract as fast as possible, which often results in waste.
3. Possible property regimes
1. Unitization - get a majority of well owners to agree to rule regarding drilling, state can enforce and make sure there are no holdouts.
2. Pro-rationing - commission determines how much oil/gas can be utilized, allocates that amount amongst producers.
3. Land use approach/Well-spacing - regulates the minimum distance between wells, reduces the number of parties drilling but does not fix everything.
4. Now, most states have statutes regulating the number of acres required for a well and  requiring apportionment of the drilling profits among the surface owners within an acreage unit.
3. Water (p.102)
1. Groundwater and surface water are treated differently even though they are connected/same.
2. Groundwater
1. Definitions
1. Interstices - gaps in sand, gravel where water goes in the ground (pores)
2. Porosity - measure of how much water the soil can store
3. Permeability - measure of how easily the water moves through the ground
1. How much you can extract depends on porosity and permeability
4. Percolation - depends on permeability
5. Recharge Rate - time it takes to put water back into the ground once taken out
6. Water Table - depth at which you hit water
7. Safe Yield - amount of ground water you can extract that balances the recharge rate; amount you can extract without lowering water table
8. Aquifer - storage for underground water
9. Subsidence - land compression that occurs after water sucked out of land
2. Attractive resource because it is not dependent upon rainfall and is historically cheap. However, over-drafting problems occur...
1. The water table might go below the roots of plants.
2. Also, salt water can infiltrate in some areas.
3. 5 Possible Property Systems
1. English CL applied rule of capture to groundwater. This rule is also followed in Eastern states where water is plentiful.
1. Problem with this approach is tragedy of the commons:
1. Technological advances made it possible to pump a lot more water.
2. Irrigation for farming meant much more water used.
2. Reasonable use doctrine (American rule) now applies in western states where water is scarce.
1. Can pump as much water as you want with 2 conditions…
1. May only take for reasonable and beneficial use
2. Is used on the overlying land (may not pump from miles away)
2. Limits rule of capture to reasonable use of groundwater.
3. There is a big debate over what use is reasonable.
1. It is not a given that you want a safe yield.
2. Instead, the state often decides in how many years it wants to deplete the aquifer.
3. Correlative use doctrine - starts with reasonable use doctrine but during times of shortage water must be used coequally (often based on # of acres owned). Must be used on overlying land.
4. Restatement rule-  Court looks at many different factors to determine what constitutes a reasonable use.
1. Does away with the rule that only use of water on overlying land is reasonable.
2. Murky rule.
5. Prior appropriation- First in time, first in right; not necessarily limited to safe yield.
3. Surface Water/Streams and Lakes
1. Has elements of both renewable and non-renewable resource.
1. Refills itself, BUT
2. Can be depleted fast enough that it is essentially non-renewable for those downstream.
2. 3 Possible Property Systems (based on geography and use)
1. English Rule- adjacent landowners have riparian rights in streams and lakes.
1. Riparian land is all land contiguous to a body of water
2. Include rights in the quantity, quality, and velocity of the water as well as recreational privileges.
3. Therefore, water cannot be diverted from its course because that would affect the riparian rights of others.
1. This rule doesn't work for mill-powered industrialization.
2. Reasonable use doctrine- riparian owner is entitled to a reasonable use of the water and downstream owners cannot enjoin the owner or recover damages unless their needs for water are being substantially interfered with.
1. In most states, domestic uses are preferred over others.
2. Ex: Evans v. Merriweather (1842) (p.103)
1. Court holds that upstream owner can take whatever water is necessary for domestic purposes w/o regard to its effect on natural flow or level of the water or the needs of lower riparians. However, use for artificial purposes (irrigation) must be reasonable and cannot negatively affect other riparians.
2. Domestic use includes water for drinking and bathing, farm animals on a small farm, irrigation of a garden for personal use (not commercial).
3. Prior appropriation doctrine- In some western states, CL riparian rights have been replaced by the prior appropriation doctrine, which is a doctrine of capture.
1. First claim, first right- water rights are determined by priority of appropriation of the water.
2. These rights are non-riparian because water can be used on land far away from the water.
1. Once a water right is established, it is an interest independent of the land and can be severed from the land and sold independently.
3. Waste doctrine: you lose your right to water if you waste it. But, it is very hard to lose your right due to waste.
4. Used in 10 arid western states in order to encourage development and efficiency.
5. Problems:
1. Not necessarily a link between first use and the most efficient use. (agricultural v. tech/industrial use)
2. Is trading/selling water a beneficial use?
3. Fosters premature development.
6. Ex. Coffin v. Left Hand Ditch Co. (p.106)
1. LHD was first to put water to beneficial use. Coffin came and tore out LHD's dam because it kept the water from flowing to his land.
2. Held LHD had right to the water because he was the first to put it to a beneficial use.