MUSIC: BRAHMS
Cello Sonatas (1862, 1886)
Mstislav Rostropovich, Cello
Rudolph Serkin, Piano
Recording: 1983
§B Lunch Tue Sep 16
Meet at SAC Law Room
after Torts
Assignment #1
Coordinators
& Kryptons:
Bonet * Erickson * Fraser
Get/Confirm Necessary
Golden * Hiers
Pseudonyms Before
Townsend * Vogel
the Weekend
Manning v. Mitcherson
Once Upon a Time
in a small town in Georgia
there lived
Two Canary Birds …
Manning v. Mitcherson
• “Sweet” lived with Mrs. Mitcherson
• [“Sour”] lived with Mr. & Mrs. Manning
• Looked almost identical
• Same parted crest
• Both escaped
Manning v. Mitcherson
• One of the escaped Canary Birds flew into
Mr. Brown’s kitchen.
• Mr. Brown gave it to the Mannings.
• The Mannings refused Mrs. Mitcherson’s
request for the bird.
• Mrs. Mitcherson sued.
To KRYPTON for DQ1.43
Manning v. Mitcherson:
DQ1.43: KRYPTON (What’s at Issue?)
The parties disagreed as to whether the
bird found in Brown’s kitchen was
“Sweet” or “Sour.”
Whose version of the facts did the
magistrate accept?
Manning v. Mitcherson:
DQ1.43: KRYPTON (What’s at Issue?)
• Magistrate/Justice of Peace Rules in Favor of
Plaintiff Mitcherson.
• Ga SCt.: “The answer of the ex-officio justice of
the peace in this case, the same being a
certiorari and no traverse thereof, must be
taken as true, ...”
“no traverse thereof” Means here?
Manning v. Mitcherson:
DQ1.43: KRYPTON (What’s at Issue?)
“The answer of the ex-officio justice of the peace in this
case, the same being a certiorari and no traverse
thereof, must be taken as true, ...”
• “no traverse thereof”  no objection/rebuttal made
• Justice’s answer must be “taken as true “ = Factual
findings not Q’ed.
– “Taken as true” about facts not law
– Ga SCt wouldn’t defer to legal holding of magistrate
So what are facts for purposes of the case?
Manning v. Mitcherson:
DQ1.43: KRYPTON (What’s at Issue?)
• Facts for purposes of the case =
– Plaintiff’s Version =
– Canary in Browns’ Kitchen was “Sweet”
So What is Defendant’s Legal
Claim on Appeal?
Manning v. Mitcherson:
DQ1.43: KRYPTON (What’s at Issue?)
Defendant’s Legal Claim
• Not “It’s My Bird” (No Traverse)
• Not “It Was Never Her Bird” (Years In Cage)
• Must Be: “She Lost Property Rights
When It Escaped”
Manning v. Mitcherson:
DQ1.44: OXYGEN (What’s at Issue?)
Why Did This Case Get to Georgia
Supreme Court???!!!
• Why did the Mannings Keep Fighting?
• Why did Mrs. Mitcherson?
Manning v. Mitcherson:
Hints about Mrs. Mitcherson
• Georgia treats husband as relevant party to
lawsuit if both spouses alive.
– Mr. Manning is the only Plaintiff, even though pretty
clearly his wife’s bird.
– Mr. Mitcherson not a party. Why not?
Manning v. Mitcherson:
Hints about Mrs. Mitcherson
• Mr. Mitcherson not a party. Why not?
• Divorce unusual in 1882 , so likely he’s dead.
– High probability she’s a Civil War widow
– If so, husband dead at least 17 years.
Manning v. Mitcherson:
Hints about Mrs. Mitcherson
• High probability she’s a Civil War widow
• If so, husband dead at least 17 years.
• Enter the Captain & the Canary!!
QUESTIONS
ON MANNING?
DEMSETZ ARTICLE
DEMSETZ ARTICLE
DQ1.30: KRYPTON
“In the world of Robinson Crusoe
property rights play no role.”
• Who is Robinson Crusoe?
• What does quote mean?
• Why does Demsetz believe this to be true?
“In the world of Robinson Crusoe
property rights play no role.”
• One definition of Property: “Legal relations
between people with regard to things.”
• Helpful to think of Property not as a noun but as
an adjective (like sacred or beautiful).
• Some animals are Sacred; some are not. Some animals
are Property, some are not. E.g., insects (other than
bees) rarely treated as Property
• In different cultures, different animals get defined as
Sacred or as Property.
In different cultures, different animals
get defined as Property.
Bombyx Moth treated as Property in China for
several thousand years.
DEMSETZ ARTICLE & ELEMENTS
•
•
•
Unit One-A has been about how people
acquire Property rights in unowned animals.
This is part of a broader issue: How and why
do things or intangible interests change from
being not-Property to Property .
Demsetz provides one way to look at this
issue that largely revolves around the concept
of “internalizing externalities.”
INTERNALIZING EXTERNALITIES
• Changing Rules, Laws or Circumstances to
Force Decision-Maker to Take External Costs
or Benefits Into Account
• Generally Imposed from Outside; Not Done by
Decision-Maker (cf. Psychology)
• Beneficial Because Means Price of Activities
Will Better Reflect Real Costs & Benefits
– Pollution costs  Damages & Regulation
– Charitable services  Subsidies/Gov’t Operation
INTERNALIZING EXTERNALITIES
• Changing Rules, Laws or Circumstances to Force
Decision-Maker to Take External Costs or Benefits
Into Account; Generally Imposed from Outside.
Several Ways to Do:
– Require Payment of Damages or Fees (or
Subsidize)
– Regulate Activity: Criminalize or Limit (or Require)
– Private Negotiation (Bribes to Do or Not Do Activity)
-- BUT Limited by Transaction Costs
DEMSETZ ARTICLE
DQ1.31: KRYPTON
Examples of internalizing
externalities from outside the
reading?
DEMSETZ FIRST THESIS
(ME & OXYGEN)
New property rights tend to
develop “when the gains of
internalization become larger than
the cost of internalization.”
DEMSETZ FIRST THESIS
DQ1.33: OXYGEN
New property rights tend to develop “when
the gains of internalization become larger
than the cost of internalization.”
•
Gains = Having more effects considered by
decision-maker, presumably leading to:
•
•
Reduction in harmful effects AND/OR
Increase in beneficial effects
• Maximum Potential Gain = Total elimination of
externalities (unlikely)
DEMSETZ FIRST THESIS
DQ1.33: OXYGEN
New property rights tend to develop “when the
gains of internalization become larger than the cost
of internalization.” What are relevant “costs”?
• costs of bargaining privately
• costs of collectively creating new rules (can be
very expensive)
• multi-party negotiation
• legislation
DEMSETZ FIRST THESIS
New property rights tend to develop
“when the gains of internalization become
larger than the cost of internalization.”
If harm from externalities >
cost of change 
change in rule
DEMSETZ FIRST THESIS
New property rights tend to develop “when
the gains of internalization become larger than
the cost of internalization.” If cost of
externalities > cost of change  change in rule
• Rough Approximation (Not Precise Math)
DEMSETZ FIRST THESIS
New property rights tend to develop “when
the gains of internalization become larger than
the cost of internalization.” If cost of
externalities > cost of change  change in rule
• Rough Approximation (Not Precise Math)
• Resulting Change in Rule Unpredictable
DEMSETZ FIRST THESIS
DQ1.32: OXYGEN
Why does the author believe that new
property rights tend to arise from “the
emergence of new or different beneficial
and harmful effects”? (p.31)
Increase in (perceived) cost of status quo
needed to overcome inertia stemming
from cost of change.
DEMSETZ FIRST THESIS
New property rights tend to develop “when the
gains of internalization become larger than the cost
of internalization.” If cost of externalities > cost of
change  change in rule
• Often Results from Social/Cultural Change
 New Social Habits  Value Change  Scarcity
 New Science/Technology 
Scarcity or Better Monitoring
DEMSETZ FIRST THESIS:
Basic Analysis
•
•
•
•
•
•
Identify decision at issue
Identify old rule
Identify neg. externalities under old rule
Identify change in circumstances
Does change increase neg. externalities?
If cost of externalities > cost of change  change
in rule
DEMSETZ FIRST THESIS:
Basic Analysis: State v. Shaw
•
•
•
•
•
•
Identify decision at issue: Thomas: Do I take fish?
Identify old rule
Identify neg. externalities under old rule
Identify change in circumstances
Does change increase neg. externalities?
If cost of externalities > cost of change  change
in rule
DEMSETZ FIRST THESIS
DQ1.34(a) (MONTAGNE) : OXYGEN
• Identify decision/activity at issue: Whether
to kill beavers.
• Identify old rule
• Identify neg. externalities under old rule
• Identify change in circumstances
• Does change increase neg. externalities?
• If cost of externalities > cost of change 
change in rule
DEMSETZ FIRST THESIS
DQ1.34(a) (MONTAGNE) : OXYGEN
• Tribe-members killing beavers; RULE = no
limits except First-in-Time
• Identify neg. externalities under old rule
• Identify change in circumstances
• Does change increase neg. externalities?
• If cost of externalities > cost of change 
change in rule
DEMSETZ FIRST THESIS
DQ1.34(b) (MONTAGNE) : OXYGEN
• Tribe-members killing beavers; RULE = no limits except
First-in-Time
•
•
•
•
Neg. Ext. = Possibility of Overhunting (Slim)
Identify change in circumstances
Does change increase neg. externalities?
If cost of externalities > cost of change 
change in rule
DEMSETZ FIRST THESIS
DQ1.34(b) (MONTAGNE) : OXYGEN
• Tribe-members killing beavers; RULE = no limits except
First-in-Time; Neg. Ext. = Possibility of Overhunting (Slim)
• French Arrive; Price of Pelts Increases;
Hunting Increases
• How does change increase neg.
externalities?
• If cost of externalities > cost of change 
change in rule
DEMSETZ FIRST THESIS
DQ1.34(c) (MONTAGNE) : OXYGEN
• Tribe-members killing beavers; RULE = no limits except
First-in-Time; Neg. Ext. = Possibility of Overhunting (Slim)
• French Arrive; Price of Pelts Rises  Both
Cost & Likelihood of Overhunting Increase
• What happens next?
• If cost of externalities > cost of change 
change in rule
DEMSETZ FIRST THESIS
DQ1.34(c) (MONTAGNE) : OXYGEN
• French Arrive; Price of Pelts Rises  Both Cost &
Likelihood of Overhunting Increase
• Tribe Develops Property Rights System
• Must have invoked decision-making system
• Decided on new rules & mechanisms to implement
• [Incurring Transaction Costs associated with change]
• If cost of externalities > cost of change 
change in rule
DEMSETZ FIRST THESIS
DQ1.34(c) (MONTAGNE) : OXYGEN
Tribe Develops Property Rights System Incurring
Transaction Costs Associated with Change
• Can Explain Under Demsetz First Thesis:
•
•
•
•
Big Change in Value of Pelts
Perceived Costs of Potential Overkilling Increase
Become Greater than Costs of Change
Leading to Change in Rule
DEMSETZ FIRST THESIS
DQ1.35: OXYGEN
Why does the author believe that the tribes of
the Southwestern U.S. did not adopt a system
for rights to Buffalo similar to the one the
Montagne for rights to beavers?
DEMSETZ FIRST THESIS
DQ1.35: OXYGEN
Why does the author believe that the tribes of
the Southwestern U.S. did not adopt a system
similar to that of the Montagne?
• No Scarcity Issue (Little Value to Outsiders)
• Beavers Dam BUT Buffalo “Roam”
(Harder/More Expensive to Create Exclusive
Property Rights)
DEMSETZ FIRST THESIS
DQ1.36 (SEXUAL HARASSMENT)
• Decision/activity at issue: Male bosses
demand sex from women as job condition
•
•
•
•
•
Old rule: Legal/No Liability
Identify neg. externalities under old rule
Identify change in circumstances
Does change increase neg. externalities?
If cost of externalities > cost of change 
change in rule
DEMSETZ FIRST THESIS
DQ1.36 (Pollution Controls)
• Decision/activity at issue: Manufacturing process
that pollutes air or water
• Old rule: No Liability
• Identify neg. externalities under old rule
• Change in circumstances: New technology allows
better measurement of pollution & effects
• Does change increase neg. externalities?
• If cost of externalities > cost of change  change
in rule
DEMSETZ FIRST THESIS
DQ1.36 (SHACK v. STATE)
• Decision/activity at issue: Limit access to MWs
living/working on your farm
• Old rule: Allowed
• Identify neg. externalities under old rule
• Change in circumstances: “Harvest of Shame” 
Federal Programs to aid MWs.
• Does change increase neg. externalities?
• If cost of externalities > cost of change  change
in rule
DEMSETZ FIRST THESIS
New property rights tend to develop “when
the gains of internalization become larger than
the cost of internalization.”
• Useful description of how legal change can occur.
• Going forward, can use to argue that legal change
should occur b/c social changes have greatly
increased negative externalities.
DEMSETZ FIRST THESIS
New property rights tend to develop “when the
gains of internalization become larger than the cost
of internalization.”
• Useful description of how legal change can occur
• Can use to argue that legal change should occur
Questions?
DEMSETZ SECOND THESIS
(ME & URANIUM)
Over Time, Process Described in
st
1 Thesis Leads to More and
Stronger Private Property Rights
DEMSETZ SECOND THESIS
Over Time, Process Described in 1st Thesis
Leads to More and Stronger Private
Property Rights
As Opposed to What?
DEMSETZ SECOND THESIS
DQ1.37: URANIUM
Alternatives to Private Property
1. State of Nature: (Can Use Power/Force to
Exclude Others)
• Common Law re Rights among Family Members
• Fairly Uncommon Today
DEMSETZ SECOND THESIS
DQ1.37: URANIUM
Alternatives to Private Property
1. State of Nature: (Can Use Power to Exclude)
2. Communal Ownership
• No one can exclude others completely
• In practice, often variants of First in Time
Common examples not found in the
excerpt?
DEMSETZ SECOND THESIS
DQ1.37: URANIUM
Alternatives to Private Property
1. State of Nature: (Can Use Power to Exclude)
2. Communal Ownership (Can’t Exclude/1st-in-Time)
3. Can Have Non-Communal State Ownership
• Like Private Property BUT Gov’t Management
• E.g., Military Bases
DEMSETZ SECOND THESIS: DQ1.37
Gradations of Private Property  Communal :
Examples (Pretty Strong Private Rights)
(1) Songs under copyright:
• Can’t perform for $$ or copy text w/o permission/$$
• Can’t limit singing in shower, etc.
(2) Farmers’ Land after State v. Shack
• Can exclude most people for most purposes
• Limits on right to exclude to meet needs of MWs
DEMSETZ SECOND THESIS: DQ1.37
Gradations of Private Property  Communal :
Examples (Pretty Weak Private Rights)
(1) Perfumes, Clothing Designs:
• Anyone can copy formula/design & sell
• Can’t lie about source (pvt property in trademark).
(2) Air
• Generally anyone can use oxygen, nitrogen, etc.
• Some limits on use if creates identifiable pollution
DEMSETZ SECOND THESIS
Over Time, Process Described in 1st Thesis
Leads to More and Stronger Private
Property Rights
Why?
Demsetz: Private Property More Efficient
Than Communal Property