1. ELEMENTS B POWER POINT SLIDES Class #13 Monday, September 21, 2015

2. MUSIC: Tchaikovsky Symphony #4 (1880) Berlin Philharmonic (2003) Conductor: Von Karajan Lunch Today Meet on Bricks @ 11:55 Brummond * Burch, Jil. Dubins* Moe Smilanich * Solares Lunch Thursday Meet on Bricks @ 12:25 Calles Smith * Castillo Cisneros* Grigoryan Hernandez * Karlin Lopez

3. KRYPTON DEMSETZ FIRST THESIS Continued ME & KRYPTON: DQ1.36

4. DEMSETZ FIRST THESIS New property rights tend to develop “when the gains of internalization become larger than the cost of internalization.”

5. DEMSETZ FIRST THESIS: Basic Analysis Identify decision at issue Identify old rule Identifyneg. externalities under old rule Identify change in circumstances Does change increase neg. externalities [or perception of harm]? If cost of externalities > cost of change  change in rule We’ll Come Back to Repeatedly in Subsequent DQs

6. DEMSETZ FIRST THESIS: DQ1.36 (b) DEVELOPMENT OF LEGAL CLAIMS RE SEXUAL HARASSMENT Decision/activity at issue: Male bosses demand sex from women as job condition Old rule: Legal/No Liability Identify neg. externalities under old rule Identify change in circumstances Does change increase neg. externalities [or perception of harms]? If cost of externalities > cost of change  change in rule

7. KRYPTON DEMSETZ FIRST THESIS: DQ1.36(c) (Shack v. State) KRYPTON Decision/activity at issue: Limit access to MWs living/working on your farm Old rule: Allowed Identify neg. externalities under old rule. Change in circumstances?:

8. KRYPTON DEMSETZ FIRST THESIS: DQ1.36(c) (Shack v. State) KRYPTON Decision/activity at issue: Limit access to MWs living/working on your farm Old rule: Allowed Neg. externalities: Poor Working Conditions Change in circumstances? “Harvest of Shame”  Federal Programs to aid MWs. Does change increase neg. externalities [or perception of harms]? If cost of externalities > cost of change  change in rule

9. DEMSETZ FIRST THESIS New property rights tend to develop “when the gains of internalization become larger than the cost of internalization.” Useful description of how legal change can occur. Going forward, can use to argue that legal change should occur b/c social changes have greatly increased negative externalities.

10. DEMSETZ FIRST THESIS New property rights tend to develop “when the gains of internalization become larger than the cost of internalization.” Useful description of how legal change can occur Can use to argue that legal change should occur Questions?

11. RADIUM DEMSETZ SECOND THESIS DQ1.37-1.40 ME & RADIUM (1.39)

12. DEMSETZ SECOND THESIS Over Time, Process Described in 1 st Thesis Leads to More and Stronger Private Property Rights

13. DEMSETZ SECOND THESIS Over Time, Process Described in 1 st Thesis Leads to More and Stronger Private Property Rights As Opposed to What?

14. DEMSETZ SECOND THESIS DQ1.37 Alternatives to Private Property 1.State of Nature: (Can Use Power/Force to Exclude Others) Common Law re Rights among Family Members Fairly Uncommon Today

15. DEMSETZ SECOND THESIS DQ1.37 Alternatives to Private Property 1.State of Nature: (Can Use Physical Force to Exclude) 2.Communal Ownership No one can exclude others completely In practice, often variants of First in Time Common Examples Access to Public Streets, Public Parks, Beaches, etc. Use of Oxygen in Air; Use of Water from Public Sources

16. DEMSETZ SECOND THESIS DQ1.37: URANIUM Alternatives to Private Property 1.State of Nature: (Can Use Force to Exclude) 2.Communal Ownership (Can’t Exclude/1 st -in-Time) 3.Can Have Non-Communal State Ownership Like Private Property BUT Gov’t Management E.g., Military Bases

17. DEMSETZ SECOND THESIS: DQ1.37 Gradations of Private Property  Communal : Examples (Pretty Strong Private Rights) (1) Songs under copyright: Can’t perform for $$ or copy text w/o permission/$$ Can’t limit singing in shower, etc. (2) Farmers’ Land after State v. Shack Can exclude most people for most purposes Limits on right to exclude to meet needs of MWs

18. DEMSETZ SECOND THESIS: DQ1.37 Gradations of Private Property  Communal : Examples (Pretty Weak Private Rights) (1) Perfumes, Clothing Designs: Anyone can copy formula/design & sell Can’t lie about source (private property in trademark). (2) Air Generally anyone can use oxygen, nitrogen, etc. Some limits on use if creates identifiable pollution

19. DEMSETZ SECOND THESIS Over Time, Process Described in 1 st Thesis Leads to More and Stronger Private Property Rights Why? Demsetz: Private Property More Efficient Than Communal Property

20. DEMSETZ SECOND THESIS: DQ1.38 Private Property More Efficient Than Communal Property (Results in Fewer Externalities) 1.Members of community will have trouble negotiating among themselves to achieve optimal level of resource use.

21. DEMSETZ SECOND THESIS: DQ1.38 Private Property More Efficient Than Communal Property (Results in Fewer Externalities) 1.Members of community will have trouble negotiating to achieve optimal level of resource use. Claim: Private Os more likely to manage resource in way to maximize long term benefits. In communal or state, no individual reaps benefits of good management, so have to do difficult group negotiation to get everyone to agree to steps needed to achieve optimum. (High transaction costs)

22. DEMSETZ SECOND THESIS: DQ1.38 Private Property More Efficient Than Communal Property (Results in Fewer Externalities) 2. The members of the community will have trouble negotiating with other communities or outsiders: to prevent interference with community’s rights to achieve useful bargains

23. DEMSETZ SECOND THESIS: DQ1.38 Private Property More Efficient Than Communal Property (Results in Fewer Externalities) 2.The members of the community will have trouble negotiating with other communities or outsiders: Standard problems of group bargaining Plus difficulty of figuring out who to bargain with (Who do I talk to if I want to buy up all the oxygen or to prevent some people from overusing oxygen?)

24. DEMSETZ SECOND THESIS DQ1.39 RADIUM Demsetz: Private Property More Efficient Than Communal Property In your experience, what ways do communities have of preventing anti-community behavior aside from bargaining or paying off the anti- social community members?

25. DEMSETZ SECOND THESIS: DQ1.39 Demsetz: Private Property More Efficient Than Communal Property Reasons to Question Claim May understate effectiveness of social sanctions/ ostracism/self-help as ways for communities to regulate behavior w/o negotiation. E.g., Law school sections Fast food containers Celebrities, NFL & Twitterverse

26. DEMSETZ SECOND THESIS Private Property More Efficient Than Communal Property (Reasons to Q Claim) May understate effectiveness of social sanctions Not always clear that private property yields better management. Individuals … may be irrationally wasteful may sacrifice long term value for short term gains may rationally place low value on consequences in distant future (time value of money)

27. DEMSETZ SECOND THESIS Private Property More Efficient Than Communal Property (Reasons to Q Claim) May understate effectiveness of social sanctions Not always clear that private property yields better management Individuals may not value future benefits highly Sometimes concerned community (e.g., re children or future generations) can do better job planning for future

28. DEMSETZ SECOND THESIS Private Property More Efficient Than Communal Property (Reasons to Q Claim) May understate effectiveness of social sanctions Not clear private property yields better management DQ1.40: If bargaining among community is so difficult, how do private property systems get created? Shows some group negotiation possible Although Demsetz would say overcoming high transaction costs very hard so only occurs if perceived costs of retaining status quo very high

29. DEMSETZ SECOND THESIS Over Time, Process Described in 1 st Thesis Leads to More and More Private Property Assuming Private Property Results in Fewer Externalities …

30. DEMSETZ SECOND THESIS Over Time, Process Described in 1 st Thesis Leads to More and More Private Property If Externalities High  Change in Rule

31. DEMSETZ SECOND THESIS Over Time, Process Described in 1 st Thesis Leads to More and More Private Property If Externalities High  Change in Rule Rule Changes Unpredictable

32. DEMSETZ SECOND THESIS Over Time, Process Described in 1 st Thesis Leads to More and More Private Property If Externalities High  Change in Rule Rule Changes Unpredictable – If to Private Property, Low Externalities = Stable

33. DEMSETZ SECOND THESIS Over Time, Process Described in 1 st Thesis Leads to More and More Private Property If Externalities High  Change in Rule Rule Changes Unpredictable – If to Private Property, Low Externalities = Stable – If not, Higher Externalities  More Change

34. DEMSETZ SECOND THESIS Over Time, Process Described in 1 st Thesis Leads to More and More Private Property If Externalities High  Change in Rule Rule Changes Unpredictable – If to Private Property, Low Externalities = Stable – If not, Higher Externalities  More Change Downloading Music as Example QUESTIONS?

35. DEMSETZ: WHAT TO TAKE AWAY Externalities = Important Idea Very Commonly Referenced Concept Want Decision-Makers to Consider Real Costs

36. DEMSETZ: WHAT TO TAKE AWAY Externalities Important 1 st Thesis: Useful Description of How Changes in Society Can Create Changes in Property Rights Can also use to argue change is needed b/c of high externalities

37. DEMSETZ: WHAT TO TAKE AWAY Externalities Important Useful Description of a Way Changes in Society Create Changes in Property Rights Arguments re Advantages of Private Property (or of Stronger Private Property Rights)

38. DEMSETZ: WHAT TO TAKE AWAY ALSO (though we didn’t spend time on): 1 st para.: Description of What Property Is (useful here & for Property class) Expectations re Rights to Act Protection from Others’ Interference Construct of Particular Society/Culture

39. DEMSETZ: WHAT TO TAKE AWAY What Counts as Property = Construct of Particular Society/Culture

40. LOGISTICS: CLASS #13 ASSIGNMENTS DUE THIS WEEK Double-check all instructions before finalizing. ALL: Group Assmt #1 Due Today @ 10 pm KRYPTON: Albers Brief Due Thurs @ 10pm URANIUM : Kesler Brief Due Sat @ 8 pm For Briefs: Use Self-Quizzes for All Escape Cases Manning Brief Posted After Class Today Mullett Brief Posted After Class Friday

41. LOGISTICS: CLASS #13 POSTED ON COURSE PAGE Course Materials: Unit Two (Part 1: Whaling Cases) Updated Syllabus & Assignment Sheet to 10/10 (Including adjustment again to where we are). No Class Wednesday (Yom Kippur) DF FRIDAY: 1 st 20 Minutes: Emily Horowitz (Ask Us) will Discuss Exam Software RADIUM BRIEFS: STATUS UPDATE

42. Introduction to Mullett v. Bradley IN - CLASS CASE BRIEF : KRYPTON

43. Mullett v. Bradley BRIEF : KRYPTON Statement of the Case: Mullett … ??? sued Bradley … for [cause of action] seeking [remedy]

44. Mullett v. Bradley BRIEF : KRYPTON Statement of the Case: Mullett, original owner of an escaped sea lion, sued Bradley … ??? for [cause of action] seeking [remedy]

45. Mullett v. Bradley BRIEF : KRYPTON Statement of the Case: Mullett, OO of an escaped sea lion, sued Bradley, who purchased the animal from its finder for [cause of action] … ??? seeking [remedy]

46. Mullett v. Bradley BRIEF : KRYPTON Statement of the Case: Mullett, OO of an escaped sea lion, sued Bradley, who purchased the animal from F for conversion (1 st sentence of case) seeking [remedy] … ???

47. Mullett v. Bradley BRIEF : KRYPTON Statement of the Case: seeking damages Mullett, OO of an escaped sea lion, sued Bradley, who purchased the animal from F, for conversion seeking damages. (1 st sentence of case)

48. Mullett v. Bradley BRIEF : KRYPTON Procedural Posture: The lower court dismissed the complaint. The plaintiff appealed. After a Trial or on a Dispositive Motion? How do you know?

49. Mullett v. Bradley BRIEF : KRYPTON Procedural Posture: after a trial The lower court dismissed the complaint after a trial. The plaintiff appealed. on the merits “The complaint was dismissed on the merits.” (Top p.43) evidence the facts proven Statements referring to evidence and proof, e.g., “ The evidence not only fails to show that there was any animus revertendi on its part, but the inference from the facts proven is quite the contrary.” (Long para. mid-p.43)

50. Mullett v. Bradley BRIEF : KRYPTON Facts Relevant to Analysis: Court’s analysis makes no mention of capture, transport, blemishes, rejection by buyer, so we can start with … P placed sea lion he owned on island … What’s Next ?

51. Mullett v. Bradley BRIEF : KRYPTON Facts Relevant to Analysis: P placed sea lion he owned on island. Sea lion escaped. P made no effort to recapture it. Fisherman found sea lion 2 weeks later, 70+ miles from the island. Fisherman sold it to D. A year later, plaintiff recognized the sea lion and demanded its return. D refused. ADDITIONAL FACT NOT FOUND IN FACT SECTION OF OPINION?

52. Mullett v. Bradley BRIEF : KRYPTON Facts Relevant to Analysis: Sea lions are native to Pacific Ocean; not found in the Atlantic. P placed sea lion he owned on island in Atlantic. Sea lion escaped. P made no effort to recapture it. Fisherman found sea lion in Atlantic 2 weeks later, 70+ miles from the island. Fisherman sold it to D. A year later, plaintiff recognized the sea lion and demanded its return. D refused.

53. Mullett v. Bradley “Fish-pound” is submerged net for catching fish (as in Shaw) Could call this sea lion “Thomas” b/c taking fish out of nets belonging to others. We’ll return to Mullett on Friday

54. MANNING BRIEF Continued

55. Manning v. Mitcherson : BRIEF ISSUE ( Procedural Part ): Did the magistrate err in awarding possession of the canary to the original owner … OR Did the Superior Court err by affirming the judgment of the magistrate awarding possession of the canary to the original owner …

56. Manning v. Mitcherson : BRIEF ISSUE ( Adding Substantive Part ): Did the magistrate err in awarding possession of the canary to the original owner … because an OO retains property rights to an escaping animal where [facts].

57. Manning v. Mitcherson : BRIEF ISSUE  NARROW HOLDING Did the magistrate err in awarding possession of the canary to the original owner because an OO retains property rights to an escaping animal where [facts].  The magistrate didn’t err in awarding possession of the canary to the original owner because an OO retains property rights to an escaping animal where [facts]. We’ll Insert List of Facts from p. 40 (2d Paragraph) + Distinctive Crest

58. Manning v. Mitcherson : FACTS & HOLDING canary The original owner retains property rights in an escaped [canary] … [that had distinctive crest] [that responded to its name] [that had escaped and returned once before] [that had been owned for two years] [that had been missing for only five days] [that OO located day after it was found]

59. NARROWING/BROADENING HOLDINGS Narrowest Version of Holding Essentially Includes All Facts of Present Case Broader Versions Address More Future Cases Because Less Specific

60. NARROWING/BROADENING HOLDINGS Narrowest Version of Holding Essentially Includes All Facts of Present Case Broader Versions Address More Future Cases Broaden Holding by (either or both of): – Making Descriptions of Some Facts More General – Eliminating Some Facts

61. NARROWING/BROADENING HOLDINGS Narrowest Version Essentially Includes All Facts of Case Broad Versions Address More Future Cases Different Versions of Broad Holdings –Play With to See What Case Might Stand For Going Forward –Remember Acceptable Formulations Must be Consistent with Result & Language of Case

62. Manning v. Mitcherson : BROADENING HOLDING : Example canaryanimal ferae naturae The original owner retains property rights in an escaped [canary]  [animal ferae naturae] [that had distinctive crest] [that responded to its name] [that had escaped and returned once before] [that had been owned for two years] [that had been missing for only five days] [that OO located day after it was found]

63. OXYGEN MANNING: From Facts to Relevant Factors DQ1.46 & Broader & Narrower Holdings featuring OXYGEN

64. OXYGEN Manning v. Mitcherson : DQ 1.46 Relevant Factors ( OXYGEN ) We’ll discuss the possible significance of each fact, including… Fact Factor  How Might You Broaden a Particular Fact to a More General Factor? (to imagine what might be part of broader versions of holding)  Why Might that Factor Matter in Determining Rights between OO and Finder? (to clarify purpose/relevance)  How Well Does the Particular Fact Further the Purposes of Considering the General Factor ? (to assess the relative importance of the fact and prepare to compare it to facts of future cases/problems)

65. OXYGEN Manning v. Mitcherson : DQ 1.46 Relevant Factors ( OXYGEN ) The original owner retains property rights in an escaped animal ferae naturae … that had distinctive crest … Possible Significance? – Possible more general factor? – Why might matter to rights of OO/F?

66. OXYGEN Manning v. Mitcherson : DQ 1.46 Relevant Factors ( OXYGEN ) Possible Significance of … that had distinctive crest  marked May help identify animal May provide notice to F of prior claim [May also show taming or emotional bond; we’ll discuss with name & escape/return.] How well does crest here do these things?

67. Manning v. Mitcherson : FACTS & HOLDING The original owner retains property rights in an escaped [canary]  [animal ferae naturae] [that had distinctive crest]  [that was marked] [that responded to its name] [that had escaped and returned once before] [that had been owned for two years] [that had been missing for only five days] [that OO located day after it was found]

68. OXYGEN Manning v. Mitcherson : DQ 1.46 Relevant Factors ( OXYGEN ) The original owner retains property rights in an escaped animal ferae naturae … that responded to its name that had escaped and returned once before Possible Significance? – Possible more general factor? – Why might matter to rights of OO/F?

69. OXYGEN Manning v. Mitcherson : DQ 1.46 Relevant Factors ( OXYGEN ) Possible Significance of … responded to name + Prior escape/return  tamed or bonded Shows labor by OO (or prior owner) May want to protect emotional connection How well does responding to name do these things here?