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Property as complex interaction

  • HENRY E. SMITH (a1)

In his important article, Benito Arruñada draws out the significance of sequential exchange for property rights and traces inadequacies in the economics of property rights to its overly contractual focus, to the exclusion of multiple transactions on the same asset. In this comment, I argue that although Arruñada's problem is a genuine one, it is part of a larger inadequacy in the economic analysis of property rights: property institutions have to manage complexity stemming from many kinds of interactions, making it problematic to focus solely on local interactions. Modular structures in property, including legal ‘things’ themselves, serve to manage this complexity. The larger problem of complexity allows us to set sequential exchange in its proper context.

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R. J. Caballero and A. Simsek (2013). ‘Fire sales in a model of complexity’, Journal of Finance, 68: 2549–87.

H. Demsetz (1969). ‘Information and efficiency: another viewpoint’, Journal of Law and Economics, 12 (1): 122.

D. Friedman (1994). ‘A positive account of property rights’, Social Philosophy and Policy, 11 (2): 116.

R. N. Langlois (2002). ‘Modularity in technology and organization’, Journal of Economic Behavior, 49 (1): 1937.

B. A. Lee and H. E. Smith (2012). ‘The nature of Coasean property’, International Review of Economics, 59 (2): 145–55.

T. W. Merrill and H. E. Smith (2000). ‘Optimal standardization in the law of property: the Numerus Clausus principle’, Yale Law Journal, 110 (1): 170.

T. W. Merrill and H. E. Smith (2001a). ‘The property/contract interface’, Columbia Law Review, 101 (4): 773852.

H. E. Smith (2015). ‘The elements of possession’, in Y.-C. Chang (ed.), The Law and Economics of Possession, Cambridge: Cambridge University Press, 65102.

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Journal of Institutional Economics
  • ISSN: 1744-1374
  • EISSN: 1744-1382
  • URL: /core/journals/journal-of-institutional-economics
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