Friday, October 5, 2012
Lee Anne Fennell (Chicago) is reconceptualizing transaction costs in property as Resource Access Costs, forthcoming in the Harvard Law Review. The abstract:
The Coasean insight that transaction costs stand between the world as we know it and an ideal of perfect efficiency has provided generations of law and economics scholars with an analytic north star. But for legal scholars interested in the efficiency implications of property arrangements, transaction costs turn out to constitute an unhelpful category. Transaction costs are related to property rights in unstable and contested ways, and they comprise a heterogeneous set of impediments, not all of which are amenable to cost-effective reduction through law. Treating them as focal confuses the cause of our difficulties in structuring access to resources (positive transaction costs) with the solution to the cost minimization problem presented by a world featuring scarce resources and positive transaction costs. A broader notion of resource access costs, appropriately subdivided, can correct problems of overinclusion, underinclusion, and insufficient specification in the transaction cost concept. The resulting analytic clarity will allow property theorists to contribute more usefully to solving resource problems.
The concept of transaction costs in property theory plays a big role in land use planning and practice, so reconceptualizing it as "resource access costs" can potentially have a big impact on the way we understand the economics of land use. Check out Fennell's latest must-read piece.