Research Handbook on the Economics of Property Law
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Research Handbook on the Economics of Property Law

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.
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Chapter 5: Toward an Economic Theory of Property in Information

Henry E. Smith


Henry E. Smith I. INTRODUCTION In what sense is intellectual property property? In what sense should it be? These questions would be a lot simpler to answer if we had a good definition of property, before we try tackling the nature and purpose of property rights in information. In this Chapter, I argue that part of the controversy over intellectual property stems from inadequacies in the economic theory of property rights. Most economists do not put much stock in labels, and ‘property’ is no exception. New Institutional Economics (NIE) is all about ‘property rights,’ but the definitions of property in NIE are surprisingly incongruent with traditional notions of property in the law. In this, both law-and-economics and the NIE tend to strip away what is distinctive about property. For many purposes this is just fine. For most economists, property rights are stable expectations of an ability to take certain actions with respect to a resource and to enjoy the return from these resource-centric actions.1 Thus, someone who has rights to pick berries on Blackacre has property rights (as it happens, a right that would be called a ‘profit’ at common law). Someone who has fee simple title has property rights to Blackacre of a more sweeping sort. This larger package could, as some would have it, be regarded as a collection of specific rights: the right to collect berries, the right to plant crops, the right to build a house etc., etc. If so, then fee simple ownership of...

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