The boundaries of private property.

• Author: Heller, Michael A.

[L]egislators cannot invent too many devices for subdividing property, only taking care to let their subdivisions go hand in hand with the natural affections of the human mind. --Letter from Thomas Jefferson to James Madison, 1785(1) I. INTRODUCTION

If your house and fields are worth more separately, divide them; if you want to leave a ring to your child now and grandchild later, split the ownership in a trust. The American law of property encourages owners to subdivide resources freely. Hidden within the law, however, is a boundary principle that limits the right to subdivide private property into wasteful fragments. While people often create wealth when they break up and recombine property in novel ways, owners may make mistakes, or their self-interest may clash with social welfare. Property law responds with diverse doctrines that prevent and abolish excessive fragmentation and keep resources well-scaled for productive use.(2) Recently, however, the Supreme Court has begun assigning a private property label to an increasing range of fragments.(3) By protecting too many fragments, the Court paradoxically undermines the usefulness of private property as an economic institution and constitutional category.(4)

The danger with fragmentation is that it may operate as a one-way ratchet: Because of high transaction costs, strategic behaviors, and cognitive biases, people may find it easier to divide property than to recombine it.(5) If too many people gain rights to use or exclude,(6) then bargaining among owners may break down. With too many owners of property fragments, resources become prone to waste either through overuse in a commons(7) or through underuse in an anticommons.(8) In well-functioning property regimes, legislatures and courts prevent such waste by drawing boundaries that constrain owners' choices about fragmentation. Outside the boundaries are commons and anticommons property; inside are forms of private property. I intend the "boundary principle" to refer to the legal doctrines that separate these property categories from each other and help to keep resources well-scaled for productive use.

The boundaries among different ownership forms can be usefully understood with reference to Figure 1. The thick vertical lines in Figure 1 represent the range of private property forms available in a well-functioning society at any given time.(9) Outside one boundary, in an open-access commons, many people own valuable rights to use a resource, such as fishing the ocean or polluting the air. Property law has traditionally treated these rights as non-private property and abolished them without compensation when necessary to overcome a tragedy of the commons. Outside of the other boundary, in a full-exclusion anticommons, many people own valuable rights to exclude others from a resource.(10) Paralleling the commons example, property law may also view such rights to exclude as non-private and abolish them without compensation when necessary to avoid an anticommons tragedy.

[Figure 1 ILLUSTRATION OMITTED]

The interesting cases for modern property theory, private law development, and constitutional inquiry bump up against these property boundaries in Figure 1. In both a limited-access commons(11) and a limited-exclusion anticommons,(12) discrete groups of owners can use or exclude others from a valuable resource.(13) The dynamics of rules bounding fragmentation are a relatively little-analyzed, real-world problem, particularly for what I call the "property governance" regimes emerging on the commons and the anticommons ends of the property continuum. The traditional image of private property as comprising sole ownership,(14) a familiar type of ownership at the center of Figure 1, will hardly be relevant in the discussion that follows.(15)

The main goals of this Article are to identify the boundary principle at the core of private property and to show how this principle challenges takings doctrine. Part II ranges across the Anglo-American law of property to define the boundary principle. Boundary rules are not oppressive or paternalistic constraints on private property, nor are they a disconnected "jumble of techniques aimed at making land more marketable."(16) Rather, they are intrinsic to and constitutive of well-functioning private property regimes. Part III situates the boundary principle in a theoretical framework. Property scholars have discussed aspects of the boundary principle at a systemic and doctrine-specific level, but none have identified its central role in preventing tragedies of the commons or anticommons.(17) If the possibility of sole ownership is a formal element of private property, then the boundary principle is its real world corollary. Part IV shows how the boundary principle can be used to examine constitutional decision-making regarding property fragments. To the extent the Court shapes its takings jurisprudence from an efficiency perspective, the Justices should consider the boundary principle's wealth-maximizing effects. By overprotecting fragments, the Court ensures anticommons waste without articulating countervailing values and confronting the tradeoffs these values demand.(18)

Private property is a more subtle institution than scholars and judges have often realized. Like Humpty Dumpty,(19) resources prove easier to break up than to put back together. Identifying the boundary principle threads together disparate property doctrines, clarifies strange asymmetries in property theory, and unknots some takings law puzzles.

2. THE BOUNDARY PRINCIPLE IN PROPERTY LAW

   This Part canvasses Anglo-American property law to show that the boundary principle is a pervasive component of well-functioning private property regimes. While governments rarely enacted the doctrines that follow with efficiency concerns as their primary (or even secondary) motivations, the doctrines have often persisted, in part, because they have proven conducive to productive uses of resources.(20) Many of these boundary rules accidentally and incompletely solved problems of transaction costs, strategic bargaining, and cognitive biases that would otherwise have led owners to waste resources.

   Ownership can be analyzed in many dimensions. One useful framework distinguishes among categories of ownership I call "physical things," "legal things," and "legal relations." While distinctions among these three types of fragmentation are primarily useful as organizational tools, the three categories do correspond to historical shifts in property theory and to trends in constitutional decision-making. Within each type of ownership, boundary doctrines can operate directly, by preventing and abolishing fragments; indirectly, by imposing costs on ownership that deter fragmentation; and informally, through non-legal institutions and norms that replace formal boundary rules.(21)

   1. Physical Boundaries: From Primogeniture to Gene Patents

      1. Defining Physical Things

         According to the lay intuition, private property is often thought of as a physical thing that can be physically divided.(22) Under this view, Blackacre itself is the core of private property. Cut in half, it yields Blackacre and Whiteacre, each equally private property. Cut in half again, the resulting lots are still private property. At some point, however, the lots become so checkerboarded(23) that the land can no longer be used productively if each of the fragments is still labeled as private property. No fragment owner can overcome the bargaining hurdles necessary to gain sole ownership of the underlying resource on a usable scale. Because too many people each may have the right to use or to exclude, the resource may be wasted in a tragedy of the commons or anticommons.

      2. Early Mechanisms

         Historically, there have been many reasons to prevent excessive physical fragmentation. Prior to developing indirect taxation mechanisms, undivided land provided the basis for public goods such as a military force.(24) Soon after the Norman Conquest, knight service required landholdings large enough to support provisions for a certain number of armed men on horses.(25) Nevertheless, tenants had social and economic incentives to fragment land by subinfeudation, particularly to avoid paying feudal incidents.(26) In response to increasing fragmentation by tenants, the Statute Quia Emptores(27) prevented further fragmentation via subinfeudation and, in exchange, gave tenants rights to market undivided holdings.(28)

         Primogeniture, the passing of an estate to the first-born son, also prevented physical fragmentation of land among aristocratic families in early England.(29) Though designed with dynastic goals foremost in mind, primogeniture ensured that land would remain physically unfragmented over generations and thereby be available to support the ambitions of family patriarchs.(30) These rules did not carry over to America,(31) where land was considered more plentiful and the common law developed other mechanisms to prevent excessive fragmentation. Despite the demise of primogeniture, modern American "elective share" statutes(32)--along with intestacy rules that limit fragmentation among heirs and escheat undivided land to the state(33)--can function as pale reflections of old-fashioned physical boundary-enforcing mechanisms. What is striking in modern property law is how much physical fragmentation is permitted, rather than how little.

         When societies lack effective rules to prevent spatial fragmentation, landholdings may split as they pass down the generations,(34) often inspiring more radical measures to reaggregate land into viable parcels. In Blackstone's time, the main spatial consolidation mechanisms were the hundreds of "Local and Personal Acts of Parliament" by which landowners enclosed agricultural lands, entrepreneurs consolidated land for industrial schemes, and local governments engaged in wide-scale public works.(35) While the agricultural enclosure movement in England...