Useless Property

In his exposition of an economic theory of property rights, Harold Demsetz reinforced a foundational assumption in property law: that private ownership is the best way to harness resources for wealth-building purposes. Implicit in Demsetz's model is the largely undefined belief that private ownership will incentivize appropriate use of the property because such use produces higher exchange value. This Article identifies a blind spot in Demsetz's theory that has largely escaped attention in property law and theory. While fully acknowledging the powerful connection between use and exchange value delineated by Demsetz, it argues that, in disparate markets for new or emerging forms of property, the grant of property rights produces the opposite result from his prediction.

As a consequence of failures in or deteriorations of use, a fundamental disconnect occurs in the process of developing exchange value. Rather than creating individual and systemic wealth, property ownership in these settings produces rent-seeking and systemic instability. Because use appears to derive inevitably from ownership, property law does little to incentivize use. To correct this omission, this Article provides a framework for incentivizing use by owners of emergent property.

It provides both a more detailed definition of use and a spectrum of interventions for this purpose. This normative framework sheds new lights on recent debates about commodification of such things as human organs and cultural property. It also provides insights on property's role as a stabilizer of markets that are prone to bubbles and crashes. A greater sensitivity to use can guide appropriate policy choices in each of these difficult areas of market malfunction.

By undertaking a theoretical analysis of use's potential as a facilitator of stable market exchange, this Article provides a framework for analyzing and solving instability at the core of many markets for emergent property. The concept of use has been under-theorized and underappreciated for its prescriptive potential. This Article begins the work of correcting that omission in property scholarship by giving use the more instrumental place it deserves in the owner's bundle of rights.