PROPERTY BEYOND EXCLUSION.

Author:Fennell, Lee Anne
 
FREE EXCERPT

TABLE OF CONTENTS INTRODUCTION 524 I. UNDERSTANDING EXCLUSION 527 A. How Boundary Exclusion Works 528 B. The Uses of Exclusion 531 1. Clearing a Space 532 2. Sowing and Reaping 532 3. Containing Negative Impacts 533 4. Metering and Monetizing 534 5. Territoriality and Coordination 536 6. Expression and Autonomy 539 II. IMPACTS AND INTERACTIONS 540 A. A Weakening Proxy 541 B. More Costly Monopolies 544 III. FROM LUMPS TO SLICES 550 A. Ownership and Overbreadth 551 B. Pinpointing Gains, Recognizing Costs 555 1. Efficiently Underused? 556 2. Familiarity and Variety 558 3. Responsibility and Residual Claims 561 IV. POST-EXCLUSION PROPERTY? 564 A. What Now? 565 1. Land Use Beyond Exclusion 565 2. Unbundling and Rebundling 568 B. Objections 570 CONCLUSION 572 INTRODUCTION

Property rights have long been associated with a distinctive technology: exclusion. (1) The idea is intuitive and the architecture is straightforward. (2) The owner can keep out others, which enables her to use her property as she likes, and enjoy or suffer whatever consequences follow. (3) Yet if we understand property as a human invention designed to optimize access to resources, then exclusion is not an inevitable defining feature of property, but just one possible mechanism for carrying out property's work. And, like any other technology, it can become outdated as conditions change. Recent decades have featured profound changes in technologies for managing resources. (4) Increasing urbanization has also dramatically altered how property generates value and imposes costs. These changes have made exclusion a less useful, less necessary, and more expensive way of regulating access to resources and the streams of benefits they produce.

This Article examines the prospects for a post-exclusion understanding of real and personal property. (5) I proceed from the premise that property is built upon complementarities, (6) the nature and scale of which have undergone seismic shifts. Physical boundaries and lengthy claims on resources are designed to group together, in time and space, elements that work together in producing value. (7) Doing so allows owners to internalize the effects of that consolidated value-production system. (8) But many of the most important complementarities are found not within a given owner's holdings, but among the holdings of different owners. (9) Moreover, as time-slices of on-demand access increasingly replace enduring lumps of possession, (10) the presumed strong complementarity between possession today and possession tomorrow begins to break down. As a result of these trends, property lines have become an increasingly poor technology for grouping together complements.

My analysis proceeds in four parts. Part I considers how boundary exclusion works. I frame exclusion as a prophylactic mechanism designed to simultaneously enable and disable human endeavors by controlling entry into a boundary-defined space. Exclusion enables projects and investments by protecting resources in temporally continuous and spatially contiguous chunks. Exclusion also disables uninvited others from using the property, or any portion thereof, for their own projects. This arrangement works well when the resources located within the property's lines are more tightly connected to each other than they are to resources lying outside those lines. Increasingly, however, a boundary exclusion strategy turns out to be both underinclusive and overinclusive in grouping together complements.

Part II examines the problems that interdependence among property holdings pose for a boundary exclusion strategy. (11) As property values come to depend primarily on activities occurring outside the owned parcel, exclusion becomes less effective in encouraging property investments and in discouraging harmful property-related behaviors. For similar reasons, one of the primary implications of an exclusion-centric model--the owner's right to veto any proposed transfer--has become more socially costly. Complementarities among properties allow owners to monopolize resources that represent crucial inputs to the projects of others. Examples include holdout problems that thwart efforts at land assembly, as well as deadlocks between neighbors over resources or rights that each controls. The resulting costs have prompted exercises of eminent domain and other changes in the way that property rights are protected against involuntary transfer.

Part III turns to the connections within property holdings that an exclusion strategy presupposes. Lumpy, long-term ownership rights are premised on complementarities over time and across space with respect to possession of an asset. New technologies for transacting over excess capacity are beginning to make continuity of ownership less important, however, and may also change the physical scale at which property is best held. Examples can be found in the "sharing economy" (better termed the "slicing economy"), (12) and in new forms of "smart property" capable of self-executing conditional claims on resources. (13) Yet continuity and contiguity remain important in many contexts; there are latent advantages to full-strength ownership and limits to new on-demand models.

Part IV considers how property rights might move beyond exclusion, and addresses some implications and objections. One concern is worth flagging at the outset: an inquiry like mine risks entangling functional questions about how best to arrange access to resources with semantic questions about the scope of words such as "exclusion" and "property." Although the Article's framing (and title) depend on the particular definitional choices I make, my ultimate concern is with the former. Whether or not one's concept of "property" logically contains a region "beyond exclusion," there is no question that changes are afoot in how people derive value from resources. This Article is concerned with how best to respond to those changes.

  1. UNDERSTANDING EXCLUSION

    An exclusion strategy places a sharp discontinuity at the property line. (14) This setup is premised on the boundary doing a reasonably good job of bundling together complementary elements. (15) Like the boundaries of a firm, property lines are designed to mark off resources that are most efficiently managed together. (16) As that analogy suggests, property lines do not imply isolation; transactions can and do occur across boundaries. (17) Moreover, property law supplements exclusion with governance strategies such as nuisance law, as Henry Smith has emphasized. (18) But the core move of exclusion presumes that there is something significant about boundary crossings that makes preventing them a good proxy for protecting what gives property value. (19)

    Although this Article suggests that exclusion is becoming less efficacious and more costly, it remains a workhorse strategy. Highlighting what exclusion is meant to do makes it easier to see how it can misfire or fail. Section A below describes how the boundary exclusion approach works, and Section B examines the purposes it might serve.

    1. How Boundary Exclusion Works

      Boundary exclusion, as I use the term, corresponds to popular notions of what it means to own property--the capacity to keep everyone else off. It is perhaps best signified by the image of a fence surrounding a parcel of real property. (20) No fence can keep out all intruders, but as Carol Rose's work emphasizes, the fence communicates a message: "This is mine." (21) Or, more bluntly, "Keep out!" (22) Where property rights are formalized and made a matter of public record, property lines communicate the same thing, even without a fence. (23) In a legal regime that protects private property rights, that message is not just cheap talk; it is backed by the force of law. (24) The law can coercively stop interlopers or impose penalties large enough to deter entry.

      An important feature of property boundaries is that they operate in rem--"against the world"--locking out all but those whom the owner chooses to admit. (25) The in rem character of property rights generates great savings in transaction costs: it is not necessary to strike a deal with every person in the universe about not entering the property, because the fact of ownership automatically generates a broad-based right to exclude everyone else. (26) This generalized right of exclusion leaves the owner free to pursue her own projects in peace, to reap the rewards from good investments or lucky gambles, to bear the losses from any experiments that go awry, and, above all, to stay put for however long she chooses to wait for her bets to pay off. (27)

      Boundary exclusion is inherently prophylactic. Interference with the uses of the owner by the activities of other parties could be addressed in other ways, and different arrangements could be made to pair inputs with outcomes. (28) Exclusion attempts to block interference before it has a chance to begin by preventing the simultaneous presence of parties who might have conflicting agendas for the same resource. (29) This strategy does not always work, for reasons discussed below. (30) But where it does succeed, it does so through the broad-brush tactic of keeping people from being physically present, rather than by regulating the things that they do while present. (31)

      By focusing on presence rather than acts, boundary exclusion is overbroad by design. (32) The degree of overbreadth depends on how completely and permanently boundaries exclude. At a fine enough grain, presence becomes an almost perfect proxy for interference, without any need to inquire into the nature of the competing acts. When your fingers are physically present in a gripping configuration on an apple in my orchard at the very moment I am trying to pick that same apple, that presence is an interference. It matters little whether your goal in gripping the apple is to assess its weight and ripeness, adjust its angle for a better view for a picture...

To continue reading

FREE SIGN UP