Property is Dummy Proof: An Experiment

28 Pages Posted: 24 Jan 2020 Last revised: 10 Jun 2020

See all articles by Oren Bar-Gill

Oren Bar-Gill

Harvard Law School

Christoph Engel

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods; University of Bonn - Faculty of Law & Economics; Erasmus University Rotterdam (EUR), Erasmus School of Law, Rotterdam Institute of Law and Economics, Students; Universität Osnabrück - Faculty of Law

Date Written: January 1, 2020

Abstract

Law is for humans. Humans suffer from cognitive limitations. Legal institutions can help humans by making these limitations irrelevant. This experiment shows that strong property rights serve this function. In theory, efficient outcomes obtain even without strong property rights. In a hypothetical world where cognitive ability is perfect, individuals would not engage in wasteful taking wars. A party would not take another’s good, if she expects that the good will ultimately be taken back. By contrast, the large majority of experimental subjects takes a token good when interacting with a computer they know to maximize profit, and that has a symmetric ability to take the good back. Experience mitigates the inefficiency, but does not eliminate it; and in the real world relevant experience is often lacking. We show that cognitive limitations prevent weak property rights – imperfectly enforced property rules and liability rules with low damages – from securing efficient outcomes. Strong property rights should be preferred, because they are dummy proof.

Keywords: Property, Liability, Cost of Appropriation, Cognitive Limitations, Sophistication, Descriptive and Normative Beliefs

JEL Classification: C91, D02, D47, D61, K11

Suggested Citation

Bar-Gill, Oren and Engel, Christoph, Property is Dummy Proof: An Experiment (January 1, 2020). MPI Collective Goods Discussion Paper, No. 2020/2, Harvard Public Law Working Paper No. 20-09, Available at SSRN: https://ssrn.com/abstract=3524877 or http://dx.doi.org/10.2139/ssrn.3524877

Oren Bar-Gill

Harvard Law School ( email )

1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States

Christoph Engel (Contact Author)

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany
+049 228 914160 (Phone)
+049 228 9141655 (Fax)

HOME PAGE: http://www.coll.mpg.de/engel.html

University of Bonn - Faculty of Law & Economics

Postfach 2220
D-53012 Bonn
Germany

Erasmus University Rotterdam (EUR), Erasmus School of Law, Rotterdam Institute of Law and Economics, Students ( email )

Burgemeester Oudlaan 50
PO Box 1738
Rotterdam
Netherlands

Universität Osnabrück - Faculty of Law

Osnabruck, D-49069
Germany

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