Theories of Property Law

¹⁾Property law is the area of law that governs the various forms of ownership and tenancy in both real and personal property. In the civil law system, there is a division between movable and immovable property. Movable property roughly corresponds to personal property (computers, cars, widgets, etc.), while immovable property corresponds to real estate (real property) and the associated rights, and obligations thereon.

The American property law system is based on the concept that property is a human invention, not the result of a divine gift or natural right (social construct). Thus, property exists only to the extent that it is recognized by the government, an approach called legal positivism. Because property is a human invention, it is necessarily based on reason. The justification of property is important because it determines the scope and extent of legally recognized property rights. Accordingly, natural law theory (the idea that certain rights naturally existed as a matter of fundamental justice regardless of government action) has little impact on modern property law.

Within the study of property law, there exist five distinctive theories explaining how or why things become property, as well as why the concept of property is necessary

Protect First Possession:

This theory offers a practical explanation of how unowned things become property. In settings where resources are plentiful, but where people are few (i.e. the early US), this first-in-time approach accurately describes how unowned property came to be owned. Particularly during the 19th Century, property rights in water, oil and gas, wild animals, and other natural resources were often allocated to the first possessor. Additionally, US laws such as the Homestead Act of 1862 are examples of the first-in-time approach towards property law.

The first-in-time approach has less relevance today because almost every tangible thing is already owned by someone, but its influence lingers in cases. For example, all of use this principle in everyday life. A parking lot on the street, a seat in a movie theater, or a spot in a long line, are all allocated through an implicit first-in-time system. Yet most scholars conclude that the first possession approach does not adequately justify property as a general matter. It describes how property rights arose, but not why it makes sense for society to recognize those rights.

Encouraging Labor

Writing in the late 1600s, John Locke reasoned that each person was entitled to the property produced through their labor. Assuming an unlimited supply of natural resources, Locke argued that when a person mixed their labor (which they owned) with natural resources (which they did not own), they acquired property rights through this mixture.

Labor theory has profoundly influenced American property law over the past 200 years. A problem with this theory is that there are no unlimited resources today (perhaps only oxygen is the only infinite resource), this theory is applied less to real property and more towards tangible personal property and intellectual property.

Maximizing Societal Happiness

This theory states that individuals recognize property in order to maximize the overall happiness of society (utilitarianism theory). We distribute and define property rights in a manner that best promotes the welfare of all citizens – not simply those who own property. A division between clear rules and equitable rules (tension between clarity and equity) is highlighted in this theory, which may not always lead to a result that is considered fair. Clear rules also minimize transaction costs, which may benefit society and reduce litigation.

Law & Economics Theory

Property is seen as an efficient method of allocating valuable resources in order to maximize one particular facet of societal happiness: wealth, typically measured in dollars.

Ensure Democracy

Civic republican theory states that property facilitates democracy. Idea is that one who has his own private property should feel free to challenge governmental actions that are abusive or unfair. Gives independence.

Personhood Theory

Property is necessary for an individual’s personal development. Each person has a close emotional connection to certain tangible things, which virtually become part of one’s self.

All of these theories help form the foundation of American property law. It is important to understand that no one theory is accepted as the only justification for property. Our property system reflects a blend of different approaches which often overlap with each other.