Private Property Rights as War
American Civil Liberties Union (ACLU)
April 3, 2013
Part I embeds the famous Coase Theorem within a more general theoretical framework of property rights. The concept of a transfer principle is defined and the final allocation of property rights is derived as a function of this transfer principle. Also, transaction costs are defined in relation to the equilibrium allocation of property rights implied by a given transfer principle.
Part II models private property rights as a conflict resolution mechanism and shows that for the Coase Theorem to be consistent on its own terms, private property rights must generate the Pareto-optimal allocation of resources among all feasible conflict resolution mechanisms. This conclusion is termed the Fearon Corollary. Equating the imposition of private property rights to war/conflict, the following question is posed: if the pre-conflict common-use property right regime is socially-optimal, under what conditions will disputing parties fail to bargain around/settle the conflict? In addition to the explanations specifically identified by Professor Fearon, the present article offers an additional explanation evidenced in the institution of private property rights itself, and, in particular, state “Castle Doctrine” laws that permit the use of lethal force in defense of real property. Skeptical that participants in a capitalist market-based economy will voluntarily enter into socially-optimal cooperative arrangements regarding the joint use of private property rights, a role for the courts is suggested wherein de facto common property rights are established by rendering private property rights random/uncertain. Although possibly producing socially-suboptimal misallocations of the property right, this uncertainty weakens private property rights, reducing the expected spoils of costly conflict, and, in turn, creates an incentive for the parties to settle/cooperate. In this way, less secure claims to private property promote social cooperation.
Part III examines judicial/Coasian intervention versus legislative/Pigouvian intervention and argues that legislative/Pigouvian rulemaking fails to make use of the disputing parties’ privately-held information to the extent that political conflict, unlike legal conflict, is “settlement-impossible.”
Number of Pages in PDF File: 72
Keywords: Property Rights, Conflict Resolution Mechanisms, Litigation Process, Coase Theorem
JEL Classification: D23, K11, D74, H40, K41working papers series
Date posted: April 4, 2013
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