Private Law Theory

ABSTRACT
Both detractors and proponents often describe property in individualistic terms, ignoring property’s character as a social institution that depends critically on participants’ respect of others’ claims. Informal property regimes are pervasive among small or specialized social groups, but neither informal property nor property law emerges unless resources become scarce. However, property law differs in important respects from informal property, generally being a formal system that aims at universal applicability. In defining rights, property law generates fixed categories so that strangers can understand the rules; similarly, property law deploys public record systems to make transactions transparent. These simpler and more formal characteristics of property law encourage transfer. To address externalities, property law limits private uses, sometimes relatively loosely and ex post, as in nuisance law, but sometimes by creating ex ante categories to stave off disputes. Public demands on private property can lead to contentious legal disputes, as in the complexities of ‘takings’ jurisprudence. Property law can also create innovative categories largely unknown to informal property, such as intellectual property and tradable environmental rights. Finally, both informal and formal property can contribute indirectly to democratic governance by modelling the recognition of rights and by encouraging compromise through trade, with the important caveat that property institutions sometimes fail in these respects.

Rose, Carol Marguerite, Property Law (April 18, 2024), Handbook of New Institutional Economics.