Econ 522 Economics of Law Dan Quint Fall 2009 Lecture 7.

Slides:



Advertisements
Similar presentations
World of Credit By: Kunal Jolly. What is Credit? Credit mean that you have an opportunity to use someone elses money to meet your own requirements.
Advertisements

ECONOMICS.
How do you lose property rights over something?. Example 5 A county ordinance requires houses to be set back 5 feet from the property line. Joe Potatoes.
Section 13.2.
Econ 522 Economics of Law Dan Quint Fall 2009 Lecture 8.
Econ 522 Economics of Law Dan Quint Spring 2012 Lecture 8 (Two handouts in back of room)
Saving and Investing.  Always pay yourself first!  All little can go a long way  Don’t save your money under your mattress! (and other savings mistakes.
Econ 522 Economics of Law Dan Quint Spring 2010 Lecture 10.
1. 1.To examine the steps to the process of becoming a business owner. 2.To differentiate the various types of business ownership. 3.To illustrate the.
Shrine Treasurers Association
Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning Chapter 49 Real Property Twomey Jennings Anderson’s Business Law and.
Law and Economics-Charles W. Upton What Rights Should be Protected.
Econ 522 Economics of Law Dan Quint Fall 2012 Lecture 8.
Types of Business Ownership
Chapter 2 Economic Systems
Types of organisation.
 Business is owned and run by one individual  Nearly 76% of all businesses  Owner receives all of its profits and bear all of its losses.
COPYRIGHT © 2010 South-Western/Cengage Learning..
Types of Agribusinesses
Forms of Business Organizations. Essential Question Why do American’s start their own businesses? Desire for Independence Desire for Money Desire for.
Econ 522 Economics of Law Dan Quint Fall 2013 Lecture 6.
Econ 522 Economics of Law Dan Quint Fall 2013 Lecture 9.
Read to Learn Describe the three basic economic questions each country must answer to make decisions about using their resources.
Transactions costs, property rigths Dan Quint Spring 2014.
Econ 522 Economics of Law Dan Quint Spring 2010 Lecture 7.
ACTIVITY! Working with the people around you, list as many of the shops at the local St Helena shopping strip as you can. You have three minutes!
Price and Quantity Controls Mr. Bordelon AP Economics.
Entrepreneurship: Owning Your Own Business
Arianna Rodriguez Ana Selman Luis Garced Chris Hameed Period: 5.
The contract of Sale Commercial Law.
Econ 522 Economics of Law Dan Quint Fall 2011 Lecture 9.
Econ 522 Economics of Law Dan Quint Spring 2014 Lecture 9.
Chapter 20 The importance of limited liability p96-99
Econ 522 Economics of Law Dan Quint Spring 2013 Lecture 7.
Econ 522 Economics of Law Dan Quint Spring 2011 Lecture 8.
Econ 522 Economics of Law Dan Quint Fall 2009 Lecture 6.
Econ 522 Economics of Law Dan Quint Fall 2010 Lecture 8.
Starting a Business: LLCs and Other Options. “Business underlies everything in our national life, including our spiritual life. Witness the fact that.
Econ 522 Economics of Law Dan Quint Fall 2009 Lecture 14.
The Private Enterprise System
PRICE AND QUANTITY CONTROLS Mr. Bordelon AP Economics.
BUSINESS AND PERSONAL LAW DECEMBER 17,   WHEN YOU WATCH….THINK…
1 Agribusiness Library Lesson : Options. 2 Objectives 1.Describe the process of using options on futures contracts, and define terms associated.
Chapter 3 Review Free Enterprise Economics. 1 In a free enterprise economy, how is the following question answered. What goods will be produced? Producers.
1 Click your mouse anywhere on the screen to advance the text in each slide. After the starburst appears, click a blue triangle to move to the next slide.
22.1 Types of Businesses. Proprietorships A sole proprietorship, or proprietorship is a business owned and operated by a single person; it is the most.
Corporations.  Legally distinct from its owners  Treated as if they are individuals  Can own property  Pay taxes  Can hire and fire workers  Can.
Section 9.2 Buying a Home. Section 9.2 Buying a Home Real property is land and everything permanently attached to it, such as buildings and trees, soil.
Private and Public law Ownership rights 1. Ownership rights in the Italian Constitution (general principles) 2. Ownership rights and other “ad rem” rights.
Types of Business Ownership Glencoe Entrepreneurship: Building a Business Sole Proprietorships and Partnerships Corporations 7.1 Section 7.2 Section 7.
Econ 522 Economics of Law Dan Quint Fall 2015 Lecture 6.
The Pursuit of Land.  The student will explain significant factors that affected the development of Georgia as part of the growth of the United States.
Forms of Business Ownership GOALS UNDERSTAND THE THREE MAJOR FORMS OF BUSINESS OWNERSHIP. DETERMINE WHEN EACH FORM OF BUSINESS OWNERSHIP IS MOST APPROPRIATE.
Econ 522 Economics of Law Dan Quint Fall 2009 Lecture 13.
Econ 522 Economics of Law Dan Quint Spring 2013 Lecture 8.
CHAPTER 7: SECTION 1 About Business Firms Why Do Business Firms Exist? A business firm is an organization that uses resources to produce goods and services.
Renting an Apartment Ch. 9. Terms to Know: »Tenant - renter - lessee »Landlord - rents property - lessor »Lease - contract.
Entrepreneurship CHAPTER 7 SECTION 2.  Corporation – business that is registered by a state and operates apart from its owners. 1.Ownership or equity.
Family Law Introduce the numerous ways in which laws and government affect them as individuals and as members of families In many ways, family life is.
Econ 522 Economics of Law Dan Quint Fall 2012 Lecture 6.
Types of Business Ownership Back to Table of Contents.
Agriculture Business Organizations
Credit CALM 20.
Sole Proprietorships -business owned by a single person or a married couple -3/4 of all businesses are sole proprietorships -Advantages – easier to make.
AGRI 1623 Farm Management III
Daniel Ehrenberg Innovative Tools for Creating and Preserving Affordable  Housing: Legal Issues and Considerations.
Unit 2 - Understand the Nature of Business
Do Now: Read  Would you accept the offer? Why or why not?
Agenda for 5th Class Admin stuff Handouts Right to Exclude Slides
Econ351 Lecture 8. Analysis of selected specific rules of property law
Presentation transcript:

Econ 522 Economics of Law Dan Quint Fall 2009 Lecture 7

1  No office hours next Wed Sept 30  No lecture next Thurs Oct 1  Extra OH Mon afternoon Oct 5, 1:30-3:30 p.m.  HW1 due Tues Oct 6, 11:00 a.m. SHARP  Extra OH Mon afternoon Oct 12, 1:30-3:30 p.m.  Midterm 1 Tues Oct 13, in class Logistics

2 Today: more applications of property law

3 More on: what can be privately owned?

4  Most organizations are not owned by anyone  churches, clubs, cooperatives, charities, etc.  But many corporations are owned  can be bought and sold like property  General principle:  Organizations whose primary purpose is to earn profits should be owned  Organizations whose primary purpose is something else should not  Ownership leads to a principal-agent problem Organizations

5  Open Access  Anyone free to use the resource  Leads to overutilization (Tragedy of the Commons)  Example: oyster beds  Unanimous Consent  Opposite of open access – multiple owners must all agree to any use of the resource  Leads to underutilization  Example: empty storefronts in post-Communist Moscow  Political Control/Regulation Multiple forms of public ownership

6 Dividing the mountain pasture among individual owners would require fencing it, which is prohibitively expensive. Instead, the highland pasture is held in common, with each village owning different pastures that are separated by natural features such as lakes and mountain peaks. If each person in the village could place as many sheep as he or she wanted in the common pasture, the meadows might be destroyed and eroded by overuse. Third form of public ownership: political control/regulation

7 In fact, the common pastures in the mountains of Iceland have not been overused and destroyed, because the villages have effective systems of governance. They have adopted rules to protect and preserve the common pasture. The sheep are grazed in common pasture in the mountains during the summer and then returned to individual farms in the valleys during the winter. The total number of sheep allowed in the mountain pasture during the summer is adjusted to its carrying capacity. Each member of the village receives a share of the total in proportion to the amount of farmland where he or she raises hay to feed the sheep in the winter. Third form of public ownership: political control/regulation

8 How are property rights established/verified?

9  Hammonds v. Central Kentucky Natural Gas Co.  Central Kentucky leased tracts of land above natural gas deposits  But geological dome lay partly under Hammonds’ land  Hammonds sued, claiming some of the gas they were extracting was his  (Anybody see “There Will Be Blood”?) Fugitive property

10  First Possession  fugitive property belongs to nobody until someone extracts it, establishing ownership  Central Kentucky would own all the gas, since they were first to actually possess it  Tied Ownership  ownership of fugitive property is tied to something else which is easier to establish – in this case, surface of the land  Hammonds would own some of the gas, since it was located under his land  principle of accession – a new thing is owned by the owner of the proximate or prominent property Two principles for establishing ownership

11  First Possession  generally simpler to apply – easy to determine who possessed property first  but, incentive to invest too much to early in order to establish ownership First Possession versus Tied Ownership

12  First Possession  generally simpler to apply – easy to determine who possessed property first  but, incentive to invest too much to early in order to establish ownership  Tied Ownership  encourages efficient use of the resource (no need to extract quickly)  but, difficulty of establishing and verifying ownership rights First Possession versus Tied Ownership

13 Rules that link ownership to possession have the advantage of being easy to administer, and the disadvantage of providing incentives for uneconomic investment in possessory acts. Rules that allow ownership without possession have the advantage of avoiding preemptive investment and the disadvantage of being costly to administer. This brings us to the following tradeoff:

14  Meant to encourage settlement of the Western U.S.  Citizens could acquire 160 acres of land for free, provided  head of a family or 21 years old  “for the purpose of actual cultivation, and not… for the use or benefit of someone else”  had to live on the claim for 6 months and make “suitable” improvements  Basically a first possession rule for land – by living on the land, you gained ownership of it  Friedman: caused people to spend inefficiently much to gain ownership of the land A nice historical example: the Homestead Act of 1862

15  Meant to encourage settlement of the Western U.S.  Citizens could acquire 160 acres of land for free, provided  head of a family or 21 years old  “for the purpose of actual cultivation, and not… for the use or benefit of someone else”  had to live on the claim for 6 months and make “suitable” improvements  Basically a first possession rule for land – by living on the land, you gained ownership of it  Friedman: caused people to spend inefficiently much to gain ownership of the land A nice historical example: the Homestead Act of 1862

16 Stack Island in the Mississippi belonged to someone. Over a period of many years the river’s current eroded the upstream end of Stack Island and deposited sediment at the downstream end, with the result that Stack Island gradually drifted downstream. Some distance below Stack Island the west bank of the river belonged to someone else, along with all islands in the section of river east of his property. After a very long time, one of them was Stack Island. Who owned it? Friedman, Law’s Order, p. 117 Another cool example of fugitive property

17  First Possession and Tied Ownership are doctrines for how ownership rights are determined  Next question: when should a resource become privately owned?  Cost of private ownership: owners must take steps to make the resource excludable – boundary maintenance  Cost of public ownership: congestion and overuse  An economically rational society will privatize a resource at the point in time where boundary maintenance costs less than the waste from overuse of the resource. When should resources become privately owned?

18  First Possession and Tied Ownership are doctrines for how ownership rights are determined  Next question: when should a resource become privately owned?  Cost of private ownership: owners must take steps to make the resource excludable – boundary maintenance  Cost of public ownership: congestion and overuse  An economically rational society will privatize a resource at the point in time where boundary maintenance costs less than the waste from overuse of the resource.  (either because congestion got worse…  or because boundary maintenance became cheaper) When should resources become privately owned?

19  Branding cattle  Vehicle ID numbers on cars  States grant deeds for property, and keep registry of legal owner What can be done to prove ownership of something?

20  Branding cattle  Vehicle ID numbers on cars  States grant deeds for property, and keep registry of legal owner  No such system for apples  Too many apples – high cost of maintaining a registry  Apples inexpensive – not much of a problem What can be done to prove ownership of something?

21  If B steals something from A, sells it to an innocent buyer C and disappears, does A still have a claim to the good?  U.S: “You can only transfer property rights you have”  C thought he was buying a TV, but instead, he was buying nothing  But there are exceptions: money, buying from legitimate dealers Can a thief give good title?

22  If B steals something from A, sells it to an innocent buyer C and disappears, does A still have a claim to the good?  U.S: “You can only transfer property rights you have”  C thought he was buying a TV, but instead, he was buying nothing  But there are exceptions: money, buying from legitimate dealers  Most of Europe: if C acted in good faith, he keeps the object  Spain – hybrid rule  American rule applies to goods stolen from a house and sold to merchant  European rule applies to goods stolen from a merchant Can a thief give good title?

23  Adverse Possession (“squatter’s rights”)  If you occupy someone else’s property for long enough, you become the legal owner, provided:  1. the occupation was adverse to the owner’s interests, and  2. the owner did not object or take legal action How might you give up (or lose) property rights?

24  Adverse Possession (“squatter’s rights”)  If you occupy someone else’s property for long enough, you become the legal owner, provided:  1. the occupation was adverse to the owner’s interests, and  2. the owner did not object or take legal action How might you give up (or lose) property rights?

25  Adverse Possession (“squatter’s rights”)  If you occupy someone else’s property for long enough, you become the legal owner, provided:  1. the occupation was adverse to the owner’s interests, and  2. the owner did not object or take legal action  Estray statutes – laws governing lost and found property How might you give up (or lose) property rights?

26 What can/can’t owners do with their property?

27  Wasn’t always the case  Limitations on who inherits lead to…  Circumvention costs One thing owners can do: determine who inherits their property after they die

28  Wasn’t always the case  Limitations on who inherits lead to…  Circumvention costs  Depletion costs One thing owners can do: determine who inherits their property after they die

29  Wasn’t always the case  Limitations on who inherits lead to…  Circumvention costs  Depletion costs  Restrictions I place on how they can use it  Impossible  circumvention and depletion costs  Allowed  difficult to maintain efficiency in changing circumstances One thing owners can do: determine who inherits their property after they die

30  Wasn’t always the case  Limitations on who inherits lead to…  Circumvention costs  Depletion costs  Restrictions I place on how they can use it  Impossible  circumvention and depletion costs  Allowed  difficult to maintain efficiency in changing circumstances  “Restraints on alienation”  Common law generally prohibits perpetuities  Restrictions limited to “lives-in-being plus 21 years” One thing owners can do: determine who inherits their property after they die

31 Limitations/exceptions to property rights

32  Property rights generally protected by injunctive relief, BUT…  Ploof v. Putnam (Sup. Ct. of Vermont, 1908)  Ploof sailing with family on Lake Champlain, storm came up  Tied up to pier on island owned by Putnam  Putnam’s employee cut the boat loose, Ploof sued  Court sided with Ploof: private necessity is an exception to the general rule of trespass  In an emergency, OK to violate someone else’s property rights; still must reimburse them for any damage done Private Necessity

33  Property rights generally protected by injunctive relief, BUT…  Ploof v. Putnam (Sup. Ct. of Vermont, 1908)  Ploof sailing with family on Lake Champlain, storm came up  Tied up to pier on island owned by Putnam  Putnam’s employee cut the boat loose, Ploof sued  Court sided with Ploof: private necessity is an exception to the general rule of trespass  In an emergency, OK to violate someone else’s property rights; still must reimburse them for any damage done Private Necessity

34  Three ways to protect an entitlement:  as property (through injunction)  by liability rule (through damages)  through inalienability  Lots of things that can’t be bought/sold:  organs  sex  heroin  Arguments in favor of inalienability… Inalienability  children  atomic weapons  human rights

35  Next Tuesday:  more exceptions to property law  more on remedies  governmental takings (eminent domain)  If you want to read ahead: Blume and Rubinfeld article  Have a good weekend! That’s all for today