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The Case for Imperfect Enforcement of Property Rights

23 Pages Posted: 23 Jan 2012 Last revised: 7 Feb 2012

Abraham Bell

Bar Ilan University - Faculty of Law; University of San Diego School of Law

Gideon Parchomovsky

University of Pennsylvania Law School; Bar Ilan University - Faculty of Law

Date Written: January 23, 2012

Abstract

A persistent theme in the literature on property rights suggests that perfect state protection of private property rights would provide owners with an optimal incentive to invest in their assets. In this Essay, we challenge this view. Specifically, we argue that in many instances, perfect state protection would result in over-investment in resources. This is because perfect enforcement gives rise to a problem akin to the moral hazard problem that plagues insurance markets. In addition to pointing out this problem, we define the conditions under which it may arise in the real world and discuss the measures law should take in order to combat it. To illustrate our thesis, we provide examples of legal rules and doctrines that may be best understood as a response to the moral hazard problem resulting from state protection of private property.

Keywords: Property, Property rights, Private property, Enforcement, Moral hazard, Self-help, Preventive measures, Investment incentives

JEL Classification: H10, H40, K11, K42, P14, P48

Suggested Citation

Bell, Abraham and Parchomovsky, Gideon, The Case for Imperfect Enforcement of Property Rights (January 23, 2012). University of Pennsylvania Law Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1990288 or http://dx.doi.org/10.2139/ssrn.1990288

Abraham Bell (Contact Author)

Bar Ilan University - Faculty of Law ( email )

Faculty of Law
Ramat Gan, 52900
Israel

HOME PAGE: http://law.biu.ac.il/English/segelE.php#

University of San Diego School of Law ( email )

5998 Alcala Park
San Diego, CA 92110-2492
United States

Gideon Parchomovsky

University of Pennsylvania Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States
215-898-1603 (Phone)

Bar Ilan University - Faculty of Law ( email )

Ramat Gan 52900
Israel
972-2-5317078 (Phone)

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