ECON 1450 – Professor Berkowitz Lecture Notes -Chapter 6 Property rights Use assets Exclusion Disposal Property Rights and Incentives

Evidence Aggregate – do property rights matter for growth Measuring property rights – inspired by glorious revolution – check on the power of the executive branch

Implications of Property Rights for Growth The Colonial Origins of Comparative Development: An Empirical Investigation By DARON ACEMOGLU, SIMON JOHNSON, AND JAMES A. ROBINSON*, AER, Measure property rights Quantify impact of property rights for growth

Economics of Property Law Coase Theorem Assignment of Property Rights and Distribution of Wealth Examples of the Coase Theorem Transaction Costs Loss Aversion and the Endowment Effect

Enforcement Rules Property v. Liability Rules Choosing Property or Liability? Trespass and Nuisance Inalienability of Property Rights

General Transaction Structure Assignment Enforcement

Consensual Transfers of Property Legal Protection of Ownership Analysis of Land Title Systems – recording versus registration Land title in the USA De Soto and land titling

Limited and Divided Ownership Leasing Private versus Group Ownership The Anti-Commons Taxes and China versus Russia

Intellectual Property Patents Trade Secrets Copyrights Trademarks Remedies

Mitigation of Damages Example – owner of duplex agrees to rent an apt to a student for 12 months at $300 per month After 6 months the student abandons apt After 12 months, landlord files for $1,800 unpaid rent Student notes that friend offered landlord $200 per month for remaining 6 months

Mitigation – cont’d Landlord refuses to take on new lease holder Student admits to breaching contract Student also argues landlord should only get $600 Court sides with student – “contractors have a duty to take on any reasonable (cost-effective) efforts to mitigate damages from breach!

Impossibility and related excuses Impossibility Frustration of purpose Commercial impracticability

Courts discharge contracts when performance is feasible but economically burdensome Conditional rule that discharges performance without penalty when costs are sufficiently high

Specific performance When is it efficient for the court to forego monetary damages (D) and, instead, order the promisor to perform the contract as written?