Arrunada Seminar: Pamela O’Connor – Conflating Contractual and Property Rights
14 January 2013 at 5:13 pm Lasse 3 comments
| Pamela O’Connor |
Conflating Contractual and Property Rights
Coming from a property law perspective, I welcome Arruñada’s recognition of the need for economists to acknowledge the nature of property as as rights in rem (rights in things, enforceable against third parties) and their essential difference from contractual rights that bind only the contracting parties. Although legal scholars such as Bernard Rudden, Thomas Merrill and Henry E Smith have been pointing out the inadequacies of traditional economic conceptions of property for some time, economic theorists have been slow to grapple with the implications.
One consequence of conflating contractual and property rights is apparent in recent Australian legislation on resource rights. State legislatures have introduced new types of rights that run with land and bind third parties as rights in rem, but are largely defined by individual agreements. Their relationship to other property rights remains unclear, and their variability makes them costly for other people to assess. Although uptake of the new rights has been slow, they have the potential to burden land titles with proliferating rights that bind all future owners and which nobody really understands.
Pamela O’Connor. Associate Professor, Faculty of Law. Monash University. Australia
Entry filed under: - Lien -, Institutions, Law and Economics, New Institutional Economics, Theory of the Firm.
Organizations and Markets 
1.
Rafe Champion | 14 January 2013 at 5:30 pm
Good to see an Australian on the list, no doubt a member of the Australian school of economists, fellow travellers with the Austrians!
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Benito Arruñada (@BenitoArrunada) | 17 January 2013 at 1:53 pm
Thank you very much, Pam. This seems to be a case of poorly defined “numerus clausus” of property (i.e., in rem) rights. Readers may benefit from a link to the classic Merrill & Smith’s paper at YLJ (2000): http://www.yalelawjournal.org/pdf/110-1/NEW%20MERRILL.pdf.
The specific case opens many interesting research questions. E.g., I wonder: (1) how the increase in transaction costs could be empirically verified (perhaps with data on the number and fees paid for title reports? registration delay?); or (2) how its impact could be quantified (maybe through price changes in affected land or in the number of transactions?).
3.
Pamela O'Connor | 17 January 2013 at 5:14 pm
The point you raise is an interesting one – how would the transactions costs of new types of ill-defined and under-specified property rights be manifested and empirically verified? The major costs would be in transactions foregone or loss of market value of land due to uncertainty about the scope of the burdens on the title, and in the economic sterilisation of land where landowners cannot put it to use without infringing other property rights. I would not expect the costs to show in registration delays in our system, as they are registered as statutory rights without investigation of their incidents.