Insurance Law

Topics: Property, Game theory, Property law Pages: 31 (11084 words) Published: August 31, 2013
ESSAY EVOLUTIONARY THEORY AND THE ORIGIN OF PROPERTY RIGHTS
James E. Krier † For legal scholars, the evolution of property rights has been a topic in search of a theory. My aim here is to draw together various accounts (some of them largely neglected in the legal literature), from dated to modern, and suggest a way they can be melded into a plausible explanation of property’s genesis and early development. What results hardly amounts to a theory, but it does suggest an outline for one. Moreover, it provides a primer on the subject, a reasonably solid foundation for thinking and talking about the evolution of property rights. I Harold Demsetz’s Toward a Theory of Property Rights,1 despite its many well-known shortcomings, has been the “point of departure for virtually all efforts to explain changes in property rights” since its publication some forty years ago.2 I make it my point of departure as well. Demsetz is an economist. The thesis put forth in his article is “that the emergence of new property rights takes place in response to . . . new benefit-cost possibilities” as resource values change;3 in other words, property rights develop in a society when the benefits of having † Earl Warren DeLano Professor, University of Michigan Law School. I am grateful to Greg York, Ph.D. (Biology), M.I.T. 1998, J.D., University of Michigan 2008, for exemplary research assistance and constructive criticism, especially on matters of evolutionary biology. Thanks also to the following for discussions, correspondence, references, and comments on various draft manuscripts: John Alcock, Greg Alexander, Michael Barr, Ben Barros, Al Brophy, Shahar Dillbary, Bob Ellickson, Lee Anne Fennell, Owen Jones, Kevin Kerber, Frances Lewis, Carol Rose, Chris Serkin, Henry Smith, and participants in the Gruter Institute Squaw Valley Conference, May 2007, the University of Colorado Property Works in Progress Workshop, June 2007, and law school workshops at the University of Alabama and Cornell University. The University of Michigan Law Library provided its usual extraordinary assistance with source materials. 1 Harold Demsetz, Toward a Theory of Property Rights, 57 AM. ECON. REV. PAPERS & PROC. 347 (1967). 2 Thomas W. Merrill, Introduction: The Demsetz Thesis and the Evolution of Property Rights, 31 J. LEGAL STUD. S331, S331 (2002); see also id. at S333, where Merrill lists the shortcomings of Demsetz’s article. We will get to them shortly. 3 Demsetz, supra note 1, at 350.

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them exceed the costs of getting them.4 As an example, Demsetz cited anthropological studies of Native American tribes inhabiting Canada’s Labrador Peninsula.5 Initially, the tribes treated hunting land as a commons open to all tribal members, who used it for various purposes, including hunting beaver for furs. For a time, the Indians’ modest needs naturally limited the rate of hunting, but matters changed when a commercial fur trade with European settlers developed in the early 1700s. The demand for furs, the rewards from hunting, and thus the rate of hunting, increased. The run on beaver posed a threat of scarcity. In response, the tribes developed a system of private hunting territories that were allocated to individual families who had the right to retaliate against trespassers.6 It is apparent in his article that Demsetz supposed these measures were a sufficient response to the problem of overhunting. (He was wrong.)7 His reasoning will sound familiar, as indeed it was. He based his analysis on the economics of common ownership, the details of which were well understood at least a half-century before Demsetz wrote.8 When a resource is held in common, any commoner who ex4 See, e.g., id. at 350 (asserting that property rights develop when the gains thus achieved become larger than the costs thus entailed); id. at 353 (discussing “the value and cost of establishing” property rights). While Demsetz argued that costs and benefits...
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