Three reasons why even good property rights cause moral anxiety.

• Author: Sherwin, Emily

Property is a vexing topic. Property rights play a central role in law and human life, but they are notoriously difficult both to define and to defend. Many ingenious arguments have been made over the years on behalf of private control of resources, but none seems fully satisfying as a justification for particular arrays of holdings or for the consequences of those holdings in hard cases.

My object in this Essay is to suggest several reasons why, entirely apart from the substantive justification for existing private property rights, property is, unavoidably, a morally uncomfortable subject. The problems I have in mind inhere in the relationship between law and morality generally, but are particularly likely to surface in the application of moral principles to property rights. As a consequence, even if private property rights are in fact morally justified, they are likely to generate moral unease.

To clarify the task, it may help to explain what the Essay is not about. I am not concerned with the validity or invalidity of any substantive theory of property rights. Nor am I concerned with the need to rank or reconcile a plurality of moral values bearing on property rights, although I shall comment on the relationship of property rights to multiple conceptions of justice. (1) Nor does my analysis turn on the potential conflict between individual self-interest and collective good, although gaps between self-interest and concern for others are sure to cause practical difficulties in designing and implementing a morally sound system of property rights. Instead, I shall identify a series of moral fault lines that make it difficult to live in moral peace with private property, even if the governing system of property rights is morally sound.

1. THE NATURE OF PROPERTY RIGHTS

   To think intelligently about the relationship between property and morality, one must first have a working definition of property. Intuitively, and traditionally, property means control over things. (2) Over the course of the twentieth century, however, the legal idea of property was diluted to the point of extinction, at least in academic circles. The conceptual devolution of property rights began in scholarly writing not specifically concerned with property. (3) Wesley Hohfeld recast legal rights as paired sets of jural relations between persons. (4) Ronald Coase characterized causation as a bilateral conflict between activities rather than the impact of one person's acts on the property or interests of another. (5) Picking up on these ideas, property theorists redefined property rights as legal relations between people in regard to resources. (6) Some went further, arguing that because legal relations between people in regard to resources play out in a wide variety of contexts, property rights ultimately amount to the outcomes of particular disputes over resources; property rights exist only as the products of case-by-case decision making by legal officials. (7) At this point, nothing distinguishes property rights from legal rights generally or gives them content in advance of the transactions or events that give rise to disputes. (8)

   This modern conception of property rights is inadequate to support the benefits we expect from a system of private property. The social functions of property rights include encouraging owners to invest effort and capital in resource development, enabling owners to plan for the future, and avoiding prisoners' dilemmas and other coordination problems that lead to mismanagement of resources. (9) It is possible that some degree of legal uncertainty can facilitate private bargaining and encourage efficient behavior. (10) Yet if property rights are nothing but the outcomes of disputes over resources, there is no basis for investment, planning, and coordination, and no starting point for exchange or for judgments about harm.

   Lately, however, some have moved away from the skeptical position and attempted to describe property rights in more promising ways. Thomas Merrill and Henry Smith, for example, have argued that property rights operate in rem: they are not simply bilateral relations, but rights the owner can assert against any and all others. (11) In other words, property rights establish a relationship of ownership between a person and a thing, as against the world at large. (12)

   My own definition places more emphasis on the form of property rights. (13) A property right, in my view, has three essential elements: an object, an assignment of the object to an owner, and a range of permitted uses that provide substantive advantages to the owner. (14) To give property rights meaning and secure their functions, at least the first two of these elements--the object of the right and its owner--must be determinate enough to be ascertainable in advance of a conflict over the resources in question.

   When the object of a property right is a physical thing, the properties of the thing itself give it determinate form. (15) Nonphysical objects--legal "things"--derive their form from determinate legal rules. (16) Thus, a lease, an easement, a copyright, or a share of stock can be an object of property if it is defined, by agreement or by law, in easily comprehensible and uncontroversial terms. (17)

   Assignment of an object of property to an owner is also a function of legal rules; the assignment is determinate if the conditions of legal ownership are spelled out in clear terms. Property rights, as defined here, can be owned by individuals or in common. (18) Property rights in a physical thing can be divided among owners, as in the case of an easement and a fee in a parcel of land, as long as each "piece" of the resource is a determinate legal thing assigned to an ascertainable owner (or owners). (19)

   Permissible uses present a more difficult problem. Legal rules do not always make clear in advance of controversy the uses an owner can make of his or her property, or the ways in which others, or the government, may interfere. One example of indeterminacy in the definition of permissible use is the law of nuisance, which often calls for an ex post balance of conflicting private and public interests; (20) another is the "essentially ad hoc" law of regulatory takings developed by the Supreme Court. (21)

   To avoid pointlessness, property rights must protect at least some core of available uses, defined in a determinate way either by legal doctrine or by reliable social and political norms. Beyond this, however, indeterminacy with regard to use may affect the utility of property rights, (22) but it does not destroy their character as property rights, distinct from other legal relations. (23) Determinate legal rules defining objects of property and conditions of ownership guarantee that the designated owner is entitled to whatever substantive benefits the law allows for the object in question. (24) General, determinate rules also ensure that the benefits of ownership of any defined class of legal things are available to all owners of objects within the class, as against all others who might interfere. (25) The full range of permissible uses attached to a class of legal things may remain uncertain, but to the extent that permissible uses have in fact been identified by rules or by general understanding, the owner is free to choose among them and others who oppose the owner's choice must marshal a legal argument against it. (26)

   Property rights, therefore, consist of legal rules that define a determinate object of property, assign the object to an ascertainable owner, and provide for a range of available uses, at least some of which are defined and protected by determinate rules. Understood in this way, property rights provide a conceptual foundation for both private exchange and claims of wrongful harm. Functionally, they provide coordination and the sense of ownership necessary to secure the social benefits of a system of private property.

   My definition of property rights sounds rather different from Merrill and Smith's characterization of property rights as rights in rem. (27) In fact, however, the two are closely related because generality and determinacy are the features of property rights that enable them to operate in rem. (28) To be effective against an indefinite number of potential infringers, property rights must pertain to recognizable objects and apply in like manner to classes of situations. Rights in rem, in other words, must be embodied in determinate rules, and determinate rules connecting control of particular resources to individuals tend to produce rights in rem. (29) Accordingly, these two ways of understanding property rights have much in common.

   Working from my definition, property rights have two structural attributes that bear on the problem of moral justification. First, as indicated, property rights are rule-governed. (30) The objects of property rights, their assignment to owners, and at least some of the practical benefits they carry, must be determinate, and determinacy typically comes either from legal rules or from private agreements backed by legal rules. (31) Second, and relatedly, property rights operate prospectively. (32) Because they are embodied in general, determinate rules, property rights predate their application to particular disputes over resources. (33) Retrospective adjudication of disputes, in cases not governed by preexisting determinate rules, may create property rights if adjudicative decisions have precedential effect, but retrospective adjudication does not implement or vindicate existing property rights. These two aspects of property rights--their dependence on rules and their prospective effect--complicate their relationship to morality in ways that will emerge in the following discussion.

2. MORAL DILEMMAS OF PROPERTY

   Our legal system defines and protects private property rights. The distribution of property rights recognized by law reflects a combination of historical events...