a. property rights develop to internalize externalities when the gains of internalization become larger than the cost of internalization
i. cost-benefit approach
b. putting property in private hands makes the individual bear the full cost of his activities -- can't externalize the majority of the cost - the tree example
2. Communal property
a. results in great externalities
i. the claims of the present generation are given an uneconomically large weight in determining the intensity with which the land is worked
3. Externalities and transaction costs
a. exist whenever some person makes a decision about how to use resources without taking full account of the effects of the decision --- because they fall on others
i. once you take into account the cost to someone else it is no longer an externality
b. when transaction costs become sufficiently high, the external effects of using resources are unlikely to be taken into account through any sort of bargaining process, and the resources are likely to be misused
c. externalities are reciprocal -- don't always assume that banning all activities which cause externalities is the answer
4. Criticism of Demsetz?
a. there are examples of common ownership working
b. how can you jump from individual to society analysis? is the analysis transferable?
a. this leads to a misallocation of resources and is the one we are concerned with
a. efficient result occurs but has a redistributionary effect that concerns us from a social justice perspective
V. Adverse Possession
1. If, within the number of years specified in the statute of limitations, the owner of land does not take legal action to eject a possessor who claims adversely to the owner, the owner is thereafter barred from bringing an action in ejectment. Once the owner is barred from suing in ejectment, the adverse possessor has title to the land.