Research Handbook on the Economics of Property Law

Research Handbook on the Economics of Property Law

Research Handbooks in Law and Economics series

Edited by Kenneth Ayotte and Henry E. Smith

Leading scholars in the field of law and economics contribute their original theoretical and empirical research to this major Handbook. Each chapter analyzes the basic architecture and important features of the institutions of property law from an economic point of view, while also providing an introduction to the issues and literature.

Chapter 7: Standardization in Property Law

Henry E. Smith

Subjects: economics and finance, law and economics, law - academic, law and economics


Henry E. Smith* I. INTRODUCTION One of the most striking features of property law is that it is far more standardized than contract law. The main purpose of contract is to serve the parties’ joint objectives, and the law allows contracting parties a great deal of leeway to customize their agreements. By contrast, property law starts with the need to establish a basic set of entitlements. Aside from the very hypothetical world of some political philosophers, the members of society never got together and consented to the various claims people made to particular resources. Instead, the law provides a framework for establishing, transferring, and enforcing basic claims to resources. In doing so the law allows only a finite set of defined basic types of property right. In civil law systems this mandatory standardization is termed the ‘numerus clausus’, which means ‘closed number’ of property forms. In common law countries, especially the United States, standardization is more of an implicit feature of the property system, and is correspondingly weaker. Nonetheless, all post-feudal property systems standardize, more or less, the basic building blocks of the property system. The question is Why? If particular parties find that some other form of property would serve their purposes better why shouldn’t they be allowed to craft what they want? Why is property law so different from contract law in this respect? This puzzle has called forth a number of explanations that are less than satisfying.1 One is that the numerus clausus is an example of...

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