Property Rules, Liability Rules, and Inalienability: One View of the Cathedral
Whenever someone may destroy the initial entitlement if he is
willing to pay an objectively determined value for it, an entitle-
ment is protected by a liability rule. This value may be what it is
thought the original holder of the entitlement would have sold it
for. But the holder’s complaint that he would have demanded
more will not avail him once the objectively determined value is
set. Obviously, liability rules involve an additional stage of state
intervention: not only are entitlements protected, but their trans-
fer or destruction is allowed on the basis of a value determined by
some organ of the state rather than by the parties themselves.
An entitlement is inalienable to the extent that its transfer is
not permitted between a willing buyer and a willing seller. The
state intervenes not only to determine who is initially entitled
and to determine the compensation that must be paid if the en-
titlement is taken or destroyed, but also to forbid its sale under
some or all circumstances. Inalienability rules are thus quite
different from property and liability rules. Unlike those rules,
rules of inalienability not only “protect”the entitlement; they
may also be viewed as limiting or regulating the grant of the en-
titlement itself.
It should be clear that most entitlements to most goods are
mixed. Taney’s house may be protected by a property rule in
situations where Marshall wishes to purchase it, by a liability rule
where the government decides to take it by eminent domain, and
by a rule of inalienability in situations where Taney is drunk or
incompetent. This article will explore two primary questions: (i)
In what circumstances should we grant a particular entitlement?
and (2) In what circumstances should we decide to protect that
entitlement by using a property, liability, or inalienability rule?
* John Thomas Smith Professor of Law, Yale University. B.S. Yale, I953; B.A.
Oxford, I955; LL.B. Yale, 1958; M.A. Oxford, I959.
**Member of the District of Columbia Bar. B.A. Yale University, 1967; J.D.
Harvard University, I970.
1See, e.g., Michelman, Pollution as a Tort: A Non-Accidental Perspective on
Calabresi’s CosTS, 80 YALE L.J. 647 (I97I) (analysis of three alternative rules in
pollution problems); Demsetz, Toward a Theory of Property Rights, 57 AM.
ECON. REV. 347 (I967) (Vol. 2 -Papers and Proceedings) (analysis of property
as a means of cost internalization which ignores liability rule alternatives).
2 Since a fully integrated approach is probably impossible, it should be empha-
sized that this article concerns only one possible way of looking at and analyzing
legal problems. Thus we shall not address ourselves to those fundamental legal
questions which center on what institutions and what procedures are most suitable
for making what decisions, except insofar as these relate directly to the problems
of selecting the initial entitlements and the modes of protecting these entitlements.
While we do not underrate the importance, indeed perhaps the primacy, of legal
process considerations, see pp. III6-I7 infra, we are merely interested in the light
that a rather different approach may shed on problems frequently looked at pri-
marily from a legal process point of view.
As Professor Harry Wellington is fond of saying about many discussions of
law, this article is meant to be only one of Monet’s paintings of the Cathedral at
Rouen. To understand the Cathedral one must see all of them. See G. HAMILTON,
CLAUDE MONET’S PAINTINGS OF ROUEN CATHEDRAL 4-5, 19-20, 27 (I960).
3 One could of course look at the state as simply a larger coalition of friends
designed to enforce rules which merely accomplish the dominant coalition’s desires.
Rules of law would then be no more than “might makes right”writ large. Such
a view does not strike us as plausible if for no other reason than that the state
decides too many issues in response to too many different coalitions. This fact, by
itself, would require a different form of analysis from that which would suffice to
explain entitlements resulting from more direct and decentralized uses of “might
makes right.”
4 For an excellent presentation of this general point by an economist, see
Samuels, Interrelations Between Legal and Economic Processes, 14 J. LAW & ECON.
435 (I97I).
We do not intend to imply that the state relies on force to enforce all or most
entitlements. Nor do we imply that absent state intervention only force would
win. The use by the state of feelings of obligation and rules of morality as means
of enforcing most entitlements is not only crucial but terribly efficient. Conversely,
absent the state, individuals would probably agree on rules of behavior which
would govern entitlements in whole series of situations on the basis of criteria
other than “might makes right.”That these rules might themselves reflect the same
types of considerations we will analyze as bases for legal entitlements is, of course,
neither here nor there. What is important is that these “social compacts”would,
no less than legal entitlements, give rise to what may be called obligations. These
obligations in turn would cause people to behave in accordance with the compact in
particular cases regardless of the existence of a predominant force. In this article
we are not concerned as much with the workings of such obligations as with the
reasons which may explain the rules which themselves give rise to the obligations.
5 “Bigger”obviously does not refer simply to size, but to the sum of an indi-
vidual’s resources. If Marshall’s gang possesses superior brain and brawn to that
of Taney, Marshall’s gang will get the cabbages.
6 Different cultures deal with the problem in different ways. Witness the fol-
lowing account:
“Life Insurance”Fee is 4 Bulls and $I200.
Port Moresby, New Guinea. Peter
Howard proved that he values his life more than four bulls and $I200.
But he wants $24 and one pig in change.
Mr. Howard gave the money and livestock to members of the Jiga tribe,
which had threatened to kill him because he killed a tribe member in an auto
accident last October 29.
The police approved the extortion agreement after telling the 38 year old
Mr. Howard they could not protect him from the sworn vengeance of the
tribe, which lives at Mt. Hagen, about 350 miles Northeast of Port Moresby.
Mr. Howard, of Cambridge, England, was attacked and badly beaten by
the tribesmen after the accident.
They said he would be killed unless the payment of money and bulls was
made according to the tribal traditions. It was the first time a white man in
New Guinea had been forced to bow to tribal laws.
After making the payment, Mr. Howard demanded to be compensated for
the assault on him by the tribesmen. He said he wanted $24 and one pig. A
Jiga spokesman told him the tribe would “think about it.”New York Times,
Feb. I6, 1972, at 17, col. 6.
7 A property rule requires less state intervention only in the sense that inter-
vention is needed to decide upon and enforce the initial entitlement but not for
the separate problem of determining the value of the entitlement. Thus, if a par-
ticular property entitlement is especially difficult to enforce- for example, the right
to personal security in urban areas – the actual amount of state intervention can
be very high and could, perhaps, exceed that needed for some entitlements pro-
tected by easily administered liability rules
Conclusion
Notes
See Also
References and Further Reading
About the Author/s and Reviewer/s
Author: international
Mentioned in these Entries
Property Rules, Liability Rules, and Inalienability: One View of the Cathedral.
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