Paper Abstract
915. Henry E. Smith, The Economics of Property Law (pre-final version), 06/2017; published in The Oxford Handbook of Law and Economics, Francesco Parisi ed., Oxford University Press (2017).
Abstract: The economic analysis of property has made progress in areas of property closest to contracts and torts, where the assumption that legal rules can be studied in isolation has some plausibility. Property law is a system, and economic analysis can be used to capture the role of traditional notions of things, possession, and ownership. The theme in all of property law is the separation of clusters of resource related activities for treatment in partial isolation of their context. The very treatment of resource-related activities through rights to things serves to chunk together attributes, activities, and duty bearers for wholesale treatment. These modular things of property law emerge from basic possession and accession. The separation of parts of the world for semi-formal treatment extends through sophisticated forms of entity property, asset partitioning, and mixed systems. All these forms of separation promote specialization and investment, but separation comes at the cost of potential strategic behavior: actors will favor parts of the system from which they benefit more, to the detriment of others. To curtail such strategic behavior around the fault lines of the property system, property law uses a variety of exclusion and governance strategies, equitable interventions, and remedies.