• Video

Limits on Property Rights: Reciprocity and Externalities

Is everyone entitled to use their own property however they wish? Professor Donald Kochan explains that there are limits to property usage, based on how the use might affect someone else. This is the concept of negative externalities. While this might seem like an unreasonable burden on the property owner, property law also relies on the concept of reciprocity which imposes the same responsibilities on other parties also. In exchange for not causing externalities, a property owner is also free from externalities that might be caused by others. https://youtube.com/watch?v=HAuukD_9NR4


We have principles in property which are not just about rights, they're also about responsibilities. And so we have the golden rule, “do unto others as you would have done unto you.” Or in property it's known as “sic utere tuo ut alienum non laedas” and that is that, "Use your property so as not to injure another." So you can use your property. You do have a right to do so. But you can't do it in a way that harms someone else. This of course is the underlying concept of nuisance law or the underlying principles upon which nuisance law is based, for example. So I have a right to use my property to play really loud music if I want to. We think that, "Well, it's my property. I can use it as I wish, so I want to play loud music." Well, your ability to play loud music is limited by the harm that you might be doing to others. You cannot use your property in a manner that harms others, and so if my neighbor is being harmed, their reasonable use and enjoyment of their property is being interfered with by my unreasonable use of my property. Then they have recourse under the system of property law to limit how I use my property. Why? Because I'm causing negative externalities. In other words, I'm using my property in a way that harms another, for which I am not paying any cost unless the court system imposes that cost on me. And so you cannot use your property in such a way as to cause negative externalities, externalizing harm from the use of your property onto others. And that responsibility is in the property system as much as rights are in the property system. Again, this allows for peaceful coexistence because it means that I get to use my property but I have a limitation, an inherent limitation built into the common law that I cannot use my property in such a manner as to harm someone else's property, and if I do, then it is a responsibility of the government, who is also a protector of the neighbor's property, to prevent me using my property in a way that accomplishes that harm. That's the concept of reciprocity that there is a reciprocal obligation on my neighbor to also use her property not to harm me. So yes, the limitation on how I use my property in the sic utere principle means that I don't truly have unlimited power to use my property as I wish. It is inherently limited. But that makes a lot of sense when I understand that my neighbor is also subject to the same limitation in that my neighbor can't use her property in a way that harms me. So I get the benefit as much as a burden from this reciprocal rule in which each of us have reciprocal limitations as much as we have reciprocal rights, which can be enforced by the courts. Again, part of the well ordered society that is facilitated by a system with strong property rights and a system of courts who are going to resolve disputes between property owners and between property owners and non property owners.

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