Chapter 1: Discovery, Capture, Creation

Question 1

Property Rights

Answer 1

Use
Possess
Exclude
Dispose 
Transfer (Sell, Gift, Direct Disposition)

Question 2

Law of Capture

Answer 2

Unowned Resource
Unowned land/public place
First in time
Possession
Exceptions

Question 3

Possession

Answer 3

intent to own
actual seizure (depravation of natural liberty)

Question 4

Exceptions

Answer 4

long-standing

socially-industrially favorable

Question 5

Johnson

Answer 5

Only if you have title to land can you convey it, occupancy does not include possession

Question 6

Pierson

Answer 6

Mere pursuit insufficient for capture

Question 7

Ghen

Answer 7

Reasonable local usage gives title to the first taker of whale who acts by appropriation

Question 8

Keeble

Answer 8

land owners considered prior possessors of wild animals on their land

Question 9

Rule of capture and wild animals

Answer 9

constructive possession of animals on land

Question 10

Eliff

Answer 10

Rule of capture does not protect against owner who negligently drills well and destroys resource

Question 11

Ground water

Answer 11

Was neighbors while in place, but first to capture applies

Question 12

Solutions to negative externalities

Answer 12

Taxation (high monitoring costs)
Regulation (technology -innovation to reduce emissions or reduce output)
Property rights

Question 13

Property v. Other Options

Answer 13

Transaction costs, monitoring and enforcement costs, hold out or free riders

Question 14

Coase theorem

Answer 14

1. clearly defined, functional markets, divisible (transferable), and defendable
2. resources will flow to highest efficiency
3. excludes transaction costs

Question 15

Farmer and the Fisherman

Answer 15

right to pollute given as property right, if given to fisher farmer is out vice versa, we do have transaction costs

Question 16

Why private property? (3)

Answer 16

1. Greater individual severity
2. More immediate/tangible responsibility
3. Internalize externalities (diminish in accordance to market and transaction costs)

Question 17

Examples of possession of farae naturae (3)

Answer 17

1. Kill and bag
2. Mortally wound and continue to pursue
3. Trap and deprive of natural liberty

Question 18

Ratione Soli says that when ______ is located on ______, the owner of the real property is deemed to be in _______ of that resource while it ______. (4)

Answer 18

1. A fugitive resource
2. private property
3. constructive possession
4. remains on the property

Question 19

Externalities are _____ and ___ of a given action that are not reflected in the ______ of the ______ and ______ (5)

Answer 19

1. Indirect costs
2. benefits
3. direct cost
4. goods
5. services

Question 20

The costs of executing a given exchange

Answer 20

Transaction costs

Question 21

Free rider

Answer 21

a person who necessarily benefits from an exchange who may not be inclined to pay for those benefits

Question 22

A person whose consent is required for a given action may use that advantage to extract more than is fair from the other actors is a

Answer 22

Holdout

Question 23

natural resources held in common tend to be over-exploited because future interests and other externalities may not be accounted for in individual decision- making; Demsetz posits that private property better internalizes these externalities

Answer 23

Tragedy of the Commons

Question 24

Absent transaction costs, if property rights are clearly defined, divisible, and defendable, individuals will bargain for and reach optimal resource allocation regardless of how initial rights are allocated

Answer 24

Coase theorem

Question 25

(b) Why wouldn’t the Ghen court decide its case just on the basis of the law as stated in Pierson? (And why wasn’t Pierson decided according to the custom of hunters, as Judge Livingston suggested in his dissent in Pierson v. Post?)

Answer 25

(b) The court could have followed Pierson v. Post, but the holding would have upset an entire industry that had operated successfully under the custom of awarding the whale to the person whose iron holds the whale, with a finder receiving a salvage (a reward). The judge limited the custom-as-law holding to cases where the custom had been recognized and acquiesced in for many years, and that undoing the custom may destroy the industry. It also helped that the finder received a salvage for finding the whale and notifying the whaler. Why wasn’t Pierson v. Post decided by custom? The dissent in Pierson wanted to do just that. One argument may be that the custom should be limited to issues unique to an industry, and Pierson and Post were not professional fox hunters. It may be that this custom was not essential to the survival of fox-hunting businesses, even if there was one at the time, or that fox hunting was not critical to the economy of the region. It may be that no one presented evidence as to the custom in the area. It may be that, as the majority stressed, the first-to-kill (or take actual possession) criterion is easier to apply in practice. The custom of hunters, moreover, may not be in the best interests of the wider society—farmers, families, and so on

Question 26

(c) The Ghen opinion states: “Neither the respondent (Rich) nor Ellis knew the whale had been killed by [Ghen], but they knew or might have known, if they had wished, that it had been shot and killed with a bomb-lance, by some person engaged in this species of business.” What do you think might have been the effect of this trial court finding in Ghen on a case like Pierson?

Answer 26

(c) The judges in Pierson, relying on Ghen, might have said that while in pursuit Post was in constructive possession of the fox for purposes of protecting his right to hunt that fox. If so, the court would have ruled in favor of Post this time. More likely, the majority in Pierson would have distinguished Ghen on the grounds that in Ghen the plaintiff killed the whale. Mere pursuit of a whale conferred no benefit. Pierson’s majority opinion, in (nonbinding) dicta, said that intercepting an animal (fox or whale) so as to deprive it of its natural liberty and make its escape impossible may be considered possession. Using this logic, harpooning and killing a whale is much like “intercepting” it, but sighting and chasing it is not.

Question 27

Who has possession of the empty underground space left after mining or after the extraction of oil or gas from a cavity in the earth? If oil or gas was injected into the cavity, would the surface owner have a trespass action against the injecting party?

Answer 27

The surface owner regains “possession” of the mined-out space after the minerals have been extracted. It may be a trespass, therefore, when already captured oil or gas is pumped back into the cavity for storage. Another thought, following the rule of wild animals, is that the oil has returned to its natural state (given its “natural liberty” again, if you will), and thus is owned by the first landowner to pump it back out. In that case, the injecting party does not have sufficient possession of it to commit a trespass with it—or, put another way, the surface owner could claim ownership by drilling for the oil himself

Question 28

Surface water

Answer 28

First in time as well “prior appropriation”

Question 29

Riparian rights

Answer 29

take little or no account of productivity of water on land