The purpose of this essay is to flesh out some aspects and properties of property rights. For many readers, this is probably redundant. Nothing I will write here is original or particularly new. However, following recent conversations I have had, I feel it is worth it to rehash some of these ideas.
Property rights, defined as the right to use resources*, exist to help resolve conflicts. In a world of scarce resources with more than one person in it, conflicts will inevitably rise. The prototypical Robinson Crusoe, who finds himself alone on a desert island, need not worry about conflicting uses of resources. He can choose to eat the berries or plant them, and there will be no other objections to their use.
However, once Friday comes ashore, now there is the risk of conflict. If Robinson wants to eat berries and Friday wants to plant them, then there is a conflict; doing one necessarily means the other cannot happen. The clear delineation of property rights, who owns the berries, in this case, helps solve/prevent the conflict. If Robinson and Friday agree that Robinson owns the berry bushes and Friday owns the fruit trees, then Friday can use the fruit trees and Robinson can use the berry bushes to their hearts’ content. Indeed, they could even trade with one another!
But, what about if there are conflicts with the use of the resources? Does Robinson have any right to object to Friday’s use? In other words, are property rights absolute? Let me be absolutely clear by what I mean by “absolute,” and here a very little mathematical formalism would be helpful: By “absolute,” I mean that the use of the resource will be determined by the resource owner with a probability of 1. If Joe owns a resource, and its use is determined by Joe and Joe alone 100% of the time, then his ownership is absolute. If the probability is less than 1 at any time, then the property right is not absolute.
Going back to Robinson and Friday, let’s say that one of Friday’s trees is a coconut tree. I have already said above that Friday has the property right to the trees. He can use the trees for his purposes. But does Friday and only Friday determine how those resources are to be used? Can we think of an example where his right might be restricted, that is its use would not be determined by Friday? Yes: Friday may not use his coconuts to bash in Robinson’s skull. One can think of many other examples. Therefore, Friday’s property right is not absolute.
Another example: I own a crowbar. I can use that crowbar for many things, but I cannot use that crowbar to pry open my neighbor’s door without his consent. Therefore, the use of my crowbar is not 100% determined by me. For a very select few set of cases, the use is determined by my neighbor. The property right is not absolute.
The discussion of using property to harm another (whether intentionally or not) is of major importance in law and economics. As Ronald Coase pointed out when property rights are ill-defined, that is to what extent their use is defined, then conflicts arise. If rights are absolute, then conflicts are inevitable and cannot have a just resolution.
To be clear, just because property rights are not absolute does not mean they are arbitrary. They cannot be revoked, renegotiated, or reneged without due cause. But the glorious thing about common law is that it allows for the flexibility needed to address conflicts which are at the present unseen but may arise down the road without sacrificing the right itself.
This blog post is a little over 600 words. I will not pretend to have done justice to the issue of property rights here. For a more detailed discussion, I’d recommend the following readings:
The Property Right Paradigm, by Armen Alchian and Harold Demsetz
Toward a Theory of Property Rights, Part I and Part II by Harold Demsetz
The Problem of Social Costs, by Ronald Coase