In dealing with the systems of property, it
is important to understand there’s sometimes a grievous mistake in the conventional wisdom,
which refers to property as arbitrary constellation of rights and duties that therefore can be changed at
will by the state because there’s nothing of deep substance there. The correct view on this subject is exactly
the opposite. If you’re talking about a system of property
that is acquired by a system of first possession, what you want to do is to make sure that the
owner has a useful bundle of rights, that permit for its maximum development and use. The current system is one of decentralized acquisition. People go out and they acquire a piece of
land and mark its boundary lines, and then other people come, perhaps somewhat later
in time, and they do the same thing. And slowly what happens is if you look at
the map, the vacant spots get filled in with individual pieces of ownership. So, what you do on the map is you start with
private possession, and then what you do is you develop the common elements: the streets,
the highways, and the sewers, which allow you to link things together. That allows for integration to take place. You can now mine on the one hand. Build foundations for your house on the other,
and also build upward, so that you’re not confined to simply a plain. There is always been a great question as to
whether or not you’re allowed to take as much land as you want. When in a state of nature this tends not to
be your problem because when you try to make your land too extensive, you’ll not be able
to defend it against wild animals. So, what typically happens is that people
choose land which gives them defensible borders. And so with respect to land, it has the following
dimensions. Property has to be infinite in duration because
if there’s a time limit, you can never quite figure out when that time limit expires and
what should be done after it expires. So, infinite horizons essentially allow for
development. Property is also in three dimensions. And so the first basic approximation is that
he owns the soil, owns the depths and owns the air. Property which you cannot use is worthless. And so, therefore, the conventional uses of
property for farming on the one hand, mining, and for building on the other, are generally
built into the basic common law definition of property rights. With respect to property, the basic rule is
that prior in time is higher in right. So that those people who take possession first essentially are allowed to keep it against all subsequent takers. This means in effect that once the property
rights were established, no individual is entitled to disrupt them. And the basic rule on this is you may do with
your property what you please because you will gain from that particular use, and other
peoples will not harm. But the major qualification on that should
be instantly apparent, which is that you’re never allowed to use your property in ways
which make it impossible for other people to use theirs. And so what happens is the use of property
which is allowed in the first interest is subject to a series of boundary constraints. Namely that you’re not allowed to commit nuisances
against your neighbors. And then what happens is the property that
you have is often in need of disposition. And what the basic rules provide for is that
you can so divide that particular property that you have. And the way you can divide it is in a whole
variety of arrangements. You can divide it by leases, you can divide
it by life estates, you can divide it by mortgages. And the theory is as you start to divide these
particular interests, what happens is the gains from trade that you can have are greater
than if the only choices you have were an outright ownership, transfer on the one hand
or no transfer at all. So divided interests in property are, in fact,
the devices by which social gains start to take place.