The property strategy.

• Author: Merrill, Thomas W.

INTRODUCTION I. THE BASIC ELEMENTS OF THE PROPERTY STRATEGY II. SOME ILLUSTRATIONS A. The American Family Farm B. Native American Tribes C. The Household III. NONNECESSARY FACILITATING FACTORS A. The Role of the State B. The Right of Alienation IV. ADVANTAGES AND DISADVANTAGES OF THE PROPERTY STRATEGY A. Advantages of the Property Strategy 1. Local Knowledge 2. Incentives to Maximize Value 3. Scalability 4. Avoiding Tragedies of the Commons 5. Foundation for Exchange 6. Checks and Balances 7. Personhood B. Disadvantages of the Property Strategy 1. New Externalities 2. Monopoly 3. Public Access Networks 4. Risk 5. Inequality CONCLUSION INTRODUCTION

My objective in this Article is to offer a description of property as an institution for organizing the use of resources in society. There are several strategies for deciding how valued things will be used, and by whom. "Might makes right" is one approach: we can let a strongman decide these questions. Bureaucratic governance is another: we can create a hierarchical organization and adopt rules and procedures for allocating resources. Group consensus is a third: questions about resource use can be resolved through meetings and discussion among those most closely involved. (1) The claim advanced here is that property is a distinctive strategy for determining how resources will be used and by whom. It is worth trying to figure out what differentiates it from other strategies for performing this function.

All organized human societies use the property strategy to one degree or another. Preliterate societies, with the possible exception of the most primitive hunter-gatherers, follow the property strategy with respect to certain resources, like tools, baskets, and crops. The most resolute communist states, such as Stalinist Russia or North Korea, give individuals unique rights to control certain resources, such as clothing and toothbrushes. Even within small and informally organized social groups like households, a version of the property strategy typically prevails with respect to certain objects such as toys, books, articles of clothing, and even bedrooms. My effort here is to unearth the common denominator that characterizes formal, and informal uses of property in a wide range of social settings as a means of organizing the use of resources.

Once we have uncovered the common denominator of the property strategy in its different manifestations over time and place, certain implications follow for the law of property. Property law is highly complex, and all of its details cannot be reduced to the elemental features of the property strategy. Nevertheless, the law of property builds upon and grows out of the property strategy. The features of the property strategy can be seen as the base of a pyramid, the upper reaches of which are occupied by highly refined and often arcane doctrines, such as the law of future interests, common-interest communities, patent and copyright law, and asset securitization. Rather than seeking to understand the institution of property by generalizing from one or more of these refined legal doctrines, I submit that a better approach is to consider what makes property work in its most elemental applications. We can then better understand the reasons for, and limits on, the property strategy that we find in the law of property.

1. THE BASIC ELEMENTS OF THE PROPERTY STRATEGY

   The general form of the property relationship has long been recognized. Broadly speaking, the property strategy is one of decentralized control over resources. Specific resources are assigned to designated persons who have unique prerogatives in dealing with the resource relative to all other persons in the relevant normative community. As Huntington Cairns once wrote, "The property relation is triadic: 'A owns B against C,' where C represents all other individuals." (2) Nonetheless, we can still ask what it means to "own" something. What does it mean to hold something "against" all other individuals? We can be more specific about each of the three components of this triadic relation: owner, object, and the concept of ownership.

   Let us begin with the objects organized under the property strategy. The property strategy applies to "things"--discrete resources. (3) To call something a "resource" is to indicate that it has value to people. It is something desired by human beings and it is scarce in that there is not enough to satisfy everyone's desire for it. When things--such as mosquitoes-are not desired by human beings, they will not be governed by the property strategy. Or if something is valuable but so plenteous that there is no perceived scarcity--like oxygen in the air--it will not be governed by the property strategy.

   The resource must also be discrete. There are many values that are not discrete or "thing-like" enough to qualify as objects of the property strategy. Some resources are too abstract to be regarded as discrete, such as ideas or cultural knowledge. (4) Other values are too closely connected to persons to be regarded as discrete resources, such as an individual's reputation (5) or (perhaps) his or her body parts and fluids. (6) The Takings Clause applies only to interferences with specific assets and not to reductions in net worth due to the imposition of general liabilities. (7) An interesting question debated by contemporary English philosophers is whether something that has exchange value and nothing else, such as a bank account balance, should be regarded as "property." (8)

   Different societies recognize different resources as being eligible for treatment as property. Many primitive societies recognize property in tools, weapons, and foodstuffs, but not in land. Communist nations recognize property in personal possessions, but not in factories or apartment buildings. Western capitalist societies once recognized property in other persons, but slavery is now universally outlawed on moral grounds. There is significant variation among different countries today in the degree to which they enforce intellectual property rights. A variety of contingent social circumstances influence what is eligible for treatment as property, including the relative scarcity of the resource, limits imposed by the costs of delineating a resource so as to make it discrete, and different political, cultural, and moral beliefs. (9) The fact that the set of things eligible for treatment as property is socially contingent does not mean, however, that the basic triadic-relation characteristic of the property strategy is similarly contingent.

   What, then, can we say about the subjects of the property strategy--those we call "owners"? The key to being an owner is having the capacity to manage discrete resources. In simple settings, owners are individuals--ordinary human beings. This is true in complex societies as well: all of us own property. The property strategy can also be implemented by conferring ownership on juridical persons, including family enterprises, partnerships, cooperatives, corporations, trusts, and nonprofit organizations. As long as an entity is organized in such a way as to allow it to manage discrete resources, it is eligible for the status of owner.

   Because the property strategy requires that discrete resources have identifiable owners, open-access resources, whether described as "inherently public property" or the "common heritage of mankind," remain outside the domain of the property strategy. (10) Similarly, resources that are "fugacious" in their natural state, like wild animals, have traditionally been regarded as unowned until they are captured. (11) Here too, the resource has no manager in its natural state. Hence, it is not included in the property strategy. Other resources are declared to be open to all as a matter of policy, such as navigable waterways (12) or patents and copyrights that have expired and returned to the public domain. (13) If management by a designated owner has been ruled out on policy grounds, the property strategy does not apply.

   Just as with the set of "things" eligible for ownership, we also find considerable variability over time and space in terms of the identities of those who are eligible to serve as owners. In many primitive societies, men, but not women, can own property. (14) In England and the United States, until the latter part of the nineteenth century, married women were severely restricted in their capacity to own property. (15) Some legal systems recognize ownership by partnerships as entities and others do not; some recognize trusts as owners and others do not, and so forth. As is the case with the set of things eligible for ownership, these cultural and legal variations on who can serve as an owner do not detract from our general understanding of the nature of the triadic property relation, where the property strategy applies.

   The crux of the property strategy lies in the concept of ownership--that is, in the nature of the prerogatives given to those called owners. Often these prerogatives are described in terms of the right to exclude others and correspond to a general duty imposed on others to desist from interfering with the object without its owner's permission. As I have previously written, the owner's right to exclude is a necessary condition of identifying something as being property. (16) Authors widely agree, at least with qualifications. (17) Even some contemporary property "pluralists" agree that exclusion is an ever-present element in identifying something as property. (18)

   Describing the prerogatives of ownership in terms of the right to exclude has the virtues of simplicity and vividness. It conjures up the image of the owner as a kind of mini-sovereign exercising absolute authority over her thing by repelling intruders and banishing unwanted freeloaders. (19) But framing the critical set of attributes in terms of exclusion obscures the intuitive understanding of what ownership entails. When...