Definition, Justification and

Emergence of Property Right

Fakultas Hukum Universitas Al Azhar Indonesia

Maret, 2021
Property Right Defined

1. Posessory Right
Right to use things and to prevent others from using them. A particular possessory right is a right
to commit a particular act or a right to prevent others from committing a particular act

2. Rights of Transfer
Right to transfer a possessory right.
Closely related, but distinct, is the right of the recipient subsequently to transfer his possessory
right to another person (and for that person to do the same, and so forth).
Justification for Property Rights

1. Incentive to work.
 The socially optimal amount of work is not performed in the absence of property rights
 The socially optimal outcome is achievable under property rights: where each individual
has rights in his own output.
 The socially optimal outcome is achievable under property rights: where a supervisory
entity has rights in an individual’s output.
2. Incentive to maintain and improve things. An essentially similar justification for property rights
is that they are associated with incentives to maintain and improve things.
3. Incentive to transfer things. An additional advantage of property rights is that they foster the
beneficial transfer of things
Continued...

4. Avoidance of dispute and of efforts to protect or to take things. In the absence of property rights,
individuals will often find it rational to devote effort and resources to taking things from
others, leading to disputes, and individuals will also find it rational to devote time and
resources protecting their things from being taken.
5. Protection againts Risk. Another advantage of property rights is that they provide individuals
with protection against risk, which is socially valuable due to individuals’ general risk aversion
6. Achievement of a desired distribution of wealth. Associated with any given measure of social
welfare will be a socially optimal distribution of the available wealth, one that maximizes
social welfare.
The emergence of property right

 Rights in land during the California Gold Rush (when gold discovered in CA, 1848)
 Rights in land on the labrador peninsula during the fur trade
 Rights to resources of the sea: fisheries, oil, minerals fron the seabed
Division of Property Rights

1. Division of rights (easement, a property will, rental arrangement, sale of property and trust)
2. Social advantages and disadvantages of division of possessory rights:
 the division of possessory rights right may be socially valuable when different parties derive different
benefits from them
 disadvantages of division of possessory rights: the first concerns the observation that certain minimal
transportation and related cost must be borne in order to enjoy possessory rights in a thing; second
disadvantage is possessory right is that division may lead to the chance of more than one individual
wishing to exercise the same rights dus of dispute; third is one person’s use may conflict with
another’s that give a rise to a detrimental externality. ..When the division is long lasting – as an
easement allowing passage over land may be -- the property is sold.
Continued

 Social advantages and disadvantages of separation of possessory rights from transfer rights
-- when a child owns property, an adult trustee is needed
 The socially optimal division of property rights, their actual division and the law
--- it will be socially desirable for property rights to be divided when but only when, the accompanying
advantages outweigh the disadvantages
Acquisition and Transfer of Property

 Acquisition of unowned property

Can be done by single or multiple individual. Which one is more efficient/effective approach?
The original acquisition and finder-keepers rules ? Which one is more optimal in acquiring property ?
 Lost and Recovery of property
 Is it socially optimal to prevent loss of property or to recover property ?
 Sale of Property
 Registration System (cost, promote sale transaction, discourage theft, etc)
 Absence of registration (unregistered goods, bona fide rules, original ownership rule)
Constraint on the sale of property imposed by
the state
 Intervention to correct external effect (banning sales, restriction of purchaser, private
motive, etc)
 Intervention to remedy problems of lack of information (certain drug’s sales)
 Intervention for paternalistic reasons (banning sales of alcohol, mariyuana, etc)
Involuntary Transfer of Property

 Adverse possession
 Use of vacant lands with good faiths
 Use of land when boundaries are not certain
 Sales of land when title is not clear
 Acquisition of property by the state (purchase or use of eminent domain power)