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Midterm: Mean=45/55 40+ fine 30+ a little worried Under 30: Nobody.

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Presentation on theme: "Midterm: Mean=45/55 40+ fine 30+ a little worried Under 30: Nobody."— Presentation transcript:

1 Midterm: Mean=45/55 40+ fine 30+ a little worried Under 30: Nobody

2 American Legal System? Suggestions Welcome What should I tell non-lawyers that I don’t? What do I say that isn’t true?

3 Next Chunk of the Course Property Intellectual Property Contract Family Law Tort Crime Antitrust Other Paths Tort/Crime Puzzle Is the Common Law Efficient?

4 Property What is in the bundle? Application of Coaseian analysis –To whom is it worth most –How can we make it easy to transfer if efficient to do so? What things should be property v commons — how do you decide? –Advantages of treating something as property –Disadvantages –Primitive societies Real property vs unreal property –Fancy ownership, rebundling –Vs own it or don ’ t –Can still use contract, but not property Lead-in to Intellectual Property

5 Intellectual property –Patent and copyright are very different –Why? Contract –Why do we need contract? transaction over time, opportunism Might not — reputational enforcement Might And the issues with formal reputational enforcement — arbitration — are like those with law. –Why contract law — why not enforce as written? –Case for freedom of contract –Case against — limitations Third party — hit man Court knows better — paternallism Duress –Complications — is there a contract, 1 party, etc. –Filling blanks Like designing a contract Efficient risk bearing Efficient breach –Defining fraud Family law — contract?

6 Property: Bundling Rights What goes in the bundle for land? –Everything connected with? But some rights connect to two or more parcels Making noise, sending radio signals Pumping oil –What goes together If I have right A does that make me The likely highest value owner of right B? –Definition that lets you fix wrong answers At low transaction cost Consider the consequences of a right to enjoin radio waves Or photons

7 Adjacency Problems Sounds etc.: common law of nuisance –I want to be able to use my property –But using it too noisily affects your property Vertical adjacency: Pennsylvania –Surface estate –Mineral estate –Support estate –Old solution--low transaction cost rebundling Similar horizontal problem –If my house slides into your pit –You have violated my right of lateral support –Under traditional common law

8 Common Pool problems We are sitting over a pool of oil –Independent action means too many holes –Pumped too fast –Since I want to get the oil before you get it Unitization –By a supermajority vote of landowners –Oil becomes the joint property of all of them Problems –Who defines the extent of the pool? –How do we keep a majority from exploiting the rest?

9 Property vs Commons When should something be property at all? –Always? How about the English Language? –Advantage: Incentives to produce Not to overuse (“tragedy of the commons”) To allocate properly –Disadvantage? Costs of defining and enforcing property rights And transacting over them Consider primitive societies –Private property in land makes sense for agriculture –Perhaps not for hunting… but –Private property in beasts being pursued? Consider the Internet –Some people sell information, but many others –Give it away –Making most of the web an informational commons Consider “Fresh Choice” and similar restaurants

10 Examples of Problems Defining what you own –Stack Island in the Mississippi –Land along the Nile –A patented idea Enforcing your rights –The down side of private property in land –What we owe to the dogs. Creating rights –Homesteading law: Rent seeking problem –Homesteading law: Bug or feature? –Why didn’t they auction the land? The experiment was tried And faced serious enforcement problems

11 How big are the benefits? Incentive to produce –How sensitive is output to price? –Perhaps novels get written anyway? –How many? Novelists have to eat too. Gain from efficient allocation –For I.P. efficient allocation is to everyone –For grain, on the other hand … Incentive (not) to consume –All you can eat salad bars more common than –All you can eat sushi or good steak –Because the inefficiency from overconsumption is less.

12 The internet as a Commons Passing on email –I forward your packets –You forward mine –There isn’t a micropayment system available “Net neutrality” –Larry Lessig’s case for what he calls a commons Actually a commodity ISP charges, but … Not according to what is in the bits Or what they are going to be used for –Are there good reasons not to let carriers charge differently for carrying different stuff? –Good reasons to let them?

13 Arguments pro and con Argument for: –You and I, on opposite ends of the net –Can do something new: VoIP, virtual surgery, … –Without first clearing it with everyone in between Argument against –High bandwidth uses Either slow everyone down or require more hardware One way of charging for bandwidth is by identifying high bandwidth uses And either forbidding them or Charging more for them –Some uses require higher quality Low latency (games) High reliability (virtual surgery) Providers would like to offer that quality--and charge for it Which means those uses get priority over others

14 This is the argument re zoning If I need permission from my neighbors to do anything nonstandard with my land –Transaction costs make it hard to get –Which prevents innovation. But … If I don’t, I can do things that –Impose costs on my neighbors –Whether in ugly buildings, noise, risk, … –Moral externalities? Whorehouse, fur factory –As high bandwidth imposes costs on other users –And zoning can provide “high quality environment” for those who value it. I haven’t yet persuaded Larry that he is against zoning –Which does by force of law –What he doesn’t want to allow people to do by contract

15 Rebundling Real property can be rebundled –Give an easement –Or a license –It runs with the land –Is binding on a future purchaser--usually Ordinary property can be restricted by contract –But the contract is not binding on a future purchaser –A constraint on the parties, not a change in the right –Usually Why the difference?

16 Information problems? When I buy a computer –I don’t know its history –Can’t reasonably be bound by “easements” For instance, an obligation Not to try to resurrect erased data from it When I buy land –Extensive system of title registration –Good reason for me to search –Easement or license may be observable from use of land –And if restriction is not findable may not bind –Benefits easier to pass than costs. Why? –Athenian law: Stone marker on land used as security for a loan Car? –Past liens on it are binding on the purchaser? –And show up on the title If information tech keeps getting better –Perhaps we should allow rebundling –For everything –And provide appropriate systems of title registration? –Pen # 1739206 may only be used on …

17 How to rebundle anything Land can be rebundled, so … –Put a non-land right into the bundle –Then rebundle as desired Touch and concern doctrine in common law –The bundle labeled ownership of this piece of land –Can only contain rights that have something to do with this piece of land Recent courts shift to a rule of –Enforce if reasonable (efficient?) –Otherwise don’t –A shift from “rule designed to produce the efficient outcome” –To “Court decides whether the outcome is efficient.”

18 Intellectual Property Our intuitions are a lot less clear –Some see it as the morally purest form of property I created this book/invention/song out of my own head With no use of any material provided by anyone So nobody else has any claim on it It’s mine, mine, mine –Others as a direct violation of property rights I own my copy of your book So should be able to use my Xerox machine to make copies of it –Economists perhaps as a substitute for a contract that cannot be enforced The buyer of the book agrees not to make copies How about the person he sells it to? Back with the bundling issue

19 Puzzle: Why are Patent and Copyright so different? To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries; Copyright –Given for the asking--even without asking –Lasts practically forever Patent –Requires an elaborate process to get –Must satisfy many conditions –Lasts for a relatively short time Why the difference?

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