'Unclear' Initial Delineation of Property Boundaries and the Third Coase Theorem

Abstract

This interdisciplinary study, which references previous research on the evolution of land law and real world examples of land market operating with unclear property boundaries, demonstrates that Ronald Coase’s argument that delimitation of property rights is a prelude to market transaction applies to urban development, in which certitude in initial property boundaries in geodetic terms is not overriding. It explains why even a powerful landlord can be unsure of and do not even want to know the boundaries of the land of his/her tenants and why this mapping limitation in itself does not inhibit market transactions. When land is treated as an input for a chattel that is no longer fixed to land, area measurement is more important than boundary-fixing. When land becomes valued for its location and fixtures (i.e., as real estate), precise boundary delineations and disputes over the precision of cadastral surveys emerge.

Boundary disputes are a particularly painful form of litigation. Feelings run high and disproportionate amounts of money are spent. Claims to small and valueless pieces of land are pressed with the zeal of Fortinbras’ army (Lord Hoffman in Wibberley v. Insley [1999] HL15).

Keywords: Coase Theorem, land boundary, land surveying, land reform, Austrian economics.

JEL Classification: A19, D23, K10, R1