The Social Function of Property

Abstract:     
Deserves property protection? Some feel it is up to the legislator to decide. Others feel that this is none of the law's business. Both extreme positions overstate their cases. Property is an institution. Like any institution, it must be useful for a socially defined purpose. And it must do a better job than alternative institutions. If this can be demonstrated, property gains legitimacy in political discourse. Lawyers, especially constitutional lawyers, will rely on these arguments for teleological construction.

There is a long list of services property renders society. Together with contract and competition, it runs a market economy. This institutional arrangement by far outperforms any competitor for allocating scarce resources. It also spurs innovation, and it gives creativity a socially beneficial direction. Good fences make good neighbours. Property makes free. It contributes to individual identity and helps socialise individuals. Owners care for their possessions, and they care for an environment in which they feel safe.

There are counter-arguments too; but none of them is so strong that property should be replaced by alternative institutions. Some redistribution may be warranted. But it needs a strong economy in the first place, so that some of the income can be taken away for the needy. Society may want to place some goods, like donor organs, extra commercium. But this will be the exception, not the rule. Within close social relationship, respect for individual ability will count more than the literal fulfilment of one's obligations. But this cannot carry over to exchange between strangers.

This paper provides an in-depth analysis of these, and many more, reasons pro and against legally protecting property. In so doing, it brings to bear knowledge from economics, psychology, political philosophy, and legal history.

The concluding chapters extend the analysis to two more recent developments. Private property rights, like those created by copyright management systems, change the normative perspective. There is no longer a demand by the owners for legal protection. On the contrary, the law must make up its mind whether it wants to control this form of self-help. A critical issue is the shift from absolute property to mere access rights. It is, however, not as new as some observers want us make believe. Landlord and tenant is only one of the many classical instances. In normative perspective, this shift is conspicuously ambivalent. It in principle improves allocative efficiency, and it gives individuals with a small income access to goods which they hardly would be able to buy. But it creates an anti-commons situation, and it weakens competition. These developments therefore call for an open governmental property policy.

Note: Paper available in German only.

Number of Pages in PDF File: 99

JEL Classification: B52, C72, D61, D63, D74, D80, K11, P1

working papers series