Scaling Property with Professor Ellickson

Presented at the 2008 Brigham-Kanner Property Rights Conference

The Problem of Resource Access

The Caosean insight that transaction costs stand between the world as we know it and an ideal of perfect efficiency has provided generations of law and economics scholars with an analytic North Star. But for legal scholars interested in the efficiency implications of property arrangements, transaction costs turn out to constitute an unhelpful category. Transaction costs are related to property rights in unstable and contested ways, and they comprise a heterogeneous set of impediments, not all of which are amenable to cost-effective reduction through law. Treating them as focal confuses the cause of our difficulties in structuring access to resources (positive transaction costs) with the solution to the problem presented by a world featuring scarce resources and positive transaction costs. A broader notion of resource access costs, appropriately subdivided, can correct problems of overinclusion, underinclusion, and all insufficient specification in the transaction cost concept. The resulting analytic clarity will allow property theorists to contribute more usefully to solving resource problems

Revealing Options

Legal scholars are beginning to explore how the options template, borrowed from finance, can be applied to legal problems outside the realm of finance. This Article uses the options framework to add a new, intermediate entitlement form to the property rule/liability rule schema pioneered by Guido Calabresi and Douglas Melamed. Building on a fascinating but underused literature on self-assessed valuation mechanisms, I propose an entitlement form that would require entitlement holders to create options for others (or for their future selves). These entitlements subject to self-made options, or ESSMOs, are capable of powerfully and elegantly addressing one of the most intractable problems in property theory - unknown subjective valuations. By requiring a party to package her subjective valuation in the form of an option - that is, a revealing option - the ESSMO dodges the primary problems associated with property rules and liability rules while harnessing advantages of each. The real payoff of this approach comes in dynamic, multiparty commons settings. Extending my earlier work, I show how the ESSMO can transform environmental controls, land conservation, and aesthetic controls in private neighborhoods. I also illustrate how revealing options can address intertemporal collective action problems in institutions, as well as time-inconsistent preferences in individuals (such as the smoker who wishes to quit)

Odds and Ends: An Epstein-Inspired Look at Luck

Lee Anne Fennell, Professor of Law University of Chicago Law School

Property and Precaution

Property in land suffers from an unacknowledged precautionary deficit. Ownership is dispensed in standardized blocks of monopoly control that are routinely retained in their entirety until someone raises an issue regarding an actual or potential incompatible land use. This arrangement, which encourages owners to take sustained, unpriced draws against a limited stock of future flexibility, sets the stage for future impasse as inconsistent plans develop. It also makes property an unnecessarily accident-prone institution, given the role that bargaining failure plays in producing costly land use conflicts. Expanding the slate of potential precautions beyond owners\u27 locational and operational choices to include their choices about the strength and content of their own entitlements offers new traction on land use disputes. It also presents interesting institutional and theoretical challenges. In this essay, I propose using a local option exchange to confront owners with the opportunity costs of maintaining veto power over unused, low-valued rights. Enabling owners to relinquish property-rule protection of such rights before conflicts arise could make property more flexible and communicative, and hence reduce the costs of incompatible land uses. This approach requires rethinking the limits of customization in property bundles and the potential for owner participation in entitlement definition