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against the whole world. The effect of this wider rule (that all takings give rise to property rights enforceable against strangers) is that, if I lose my necklace and you find it and take possession of it, you acquire ownership of it enforceable against everyone except me. But the rule goes further than this. If you steal the necklace from me, you acquire precisely the same rights in it, so that, if your friend snatches it away from you, you will be entitled to recover it from her. In section 4.2 below, we concentrate on the first occupancy rule as it applies to unowned things, and then return to look at the wider rule in Chapter 7. However, it is important to appreciate that many of the factors that justify the first occupancy rule as it applies to unowned things also justify the conferring of property rights on finders and thieves, as we see in Chapter 7.
In sections 4.3 and 4.4 below, we look in more detail at two particular ways in which original acquisition might occur, in both of which pragmatic considerations have had a significant effect on the development of allocation rules. The first is where things are newly created. We deal with this in section 4.3, concentrating on the problem of the allocation of new things that are the income or product of preexisting things. The second is through capture of resources. This is considered in section 4.4.
The problem of the allocation of resources arises in a different and acute form when one property system becomes superimposed upon another, characteristically when one state assumes control over another through colonisation. Do all inhabitants become subject to the coloniser’s property system? If so, this is likely to involve the obliteration of the indigenous population’s pre-existing property entitlements (which may well not take the same form as property rights recognisable in the coloniser’s system), leaving them with nothing but the right to ‘buy into’ the new system. Alternatively, if pre-existing property entitlements are to be respected, how are the indigenous entitlements to be assimilated into the coloniser’s property system? These are the problems that had to be considered by the courts and then by the legislature in Australia when indigenous Australians sought to reassert their traditional land rights. We look at these issues in section 4.5 below.
4.2. The first occupancy rule
In our legal system, as in many others, the primary rule is that property rights in a previously unowned resource will be allocated to the first person to take that thing into his control, or, as explained in the Introduction, to the first person to stake a claim in an authorised way, for example by filing for a patent. Why do we use this principle for allocating property rights in unowned resources?
4.2.1. Intuitive ordering
One explanation is that it accords with our intuitive ordering of things. We queue at bus stops and for cinema seats. Lueck points out that this is a characteristic way of sharing out temporary use of open access or limited access communal resources:
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The use of customary first possession rules in businesses, families, and social settings is universal. In business, first possession is used to establish rights to customer service and to claim merchandise for later purchase. Thus, people claim service by standing in line, putting coats over chairs, depositing earnest money, making reservations, and putting holds on goods. In families, first possession is used to allocate household goods such as books, chairs, and tools. In schools, children claim first dibs on books, seats, and tasks. First possession is well known in labor contracts where it manifests itself as seniority privileges for layoffs, overtime, and other perquisites. At ski resorts, fresh powder is allocated among paying customers by first possession.
. . . Nearly all of these cases have a clear asset owner (e.g. cafe tables, ski hill), so first possession does not grant the victorious claimant perpetual ownership. Instead, the claimant gets a temporary right under the rule of capture . . . Within families, first possession can be viewed as an internal rule of capture associated with common property ownership of family resources and is simply a cheap way to allocate temporary use of an asset. In many cases, the assets are durable (e.g. chairs, parking spaces) . . . [and] the temporary rights of the claimants are not transferable.
(Lueck, ‘First Possession as the Basis of Property’, p. 218)
Is there, however, a rational basis for this intuitive ordering, and are there disadvantages in adopting it as a basis for legal allocation of unowned resources?
4.2.2. Preservation of public order
Once you have taken physical control of a thing, the law is faced with the choice of either protecting your possession against strangers or standing by while it is snatched away from you. One of the reasons why the law confers rights on the first taker is to prevent a disorderly free-for-all: generally speaking, it is easier and cheaper to preserve the peace by protecting those in possession from intruders than by allowing them to fight it out between themselves. John Stuart Mill goes so far as to say that the jurisdiction of tribunals to protect possessors against intruders may well have pre-dated their jurisdiction to determine rights:
Private property, as an institution, did not owe its origin to any of those considerations of utility, which plead for the maintenance of it when established. Enough is known of rude ages, both from history and from analogous states of society in our own time, to show that tribunals (which always precede laws) were originally established, not to determine rights, but to repress violence and terminate quarrels. With this object chiefly in view, they naturally enough gave legal effect to first occupancy, by treating as the aggressor the person who first commenced violence, by turning, or attempting to turn, another out of possession. The preservation of the peace, which was the original object of civil government, was thus attained; while by confirming, to those who already possessed it, even what was not the fruit of personal exertion, a guarantee was incidentally given to them and others that they would be protected in what was so.
(Mill, Principles of Political Economy, Book II, Chapter I, section 2)
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There is also the question of proof. Law enforcers seeking to avert public disorder between rival claimants to land or goods need to be able to identify quickly the person to be protected. Physical control is relatively easy to identify on the ground, and so a general direction to law enforcers to protect possessors against intruders will be workable in practice – infinitely more so than, for example, a direction that they should ascertain who is the more deserving, or who first mixed their labour with the thing, or who is capable of using the thing more productively.
4.2.3. Simplicity
The simplicity and certainty of the first occupancy rule is one of its main attractions for Richard Epstein, as he explains in Extract 4.1 below. The first occupancy rule enables property rights to be allocated by a single, simple rule understandable by all without recourse to litigation and according to most people’s intuitive feeling of fairness. In order to assess the validity of rival claims to a previously unowned resource, all one need do is ask the simple question: who got there first? As Epstein says, except in the improbable case of a tie, all can be made to depend on the single variable of time, and ‘getting a lot of results out of a little bit of information surely enhances the overall efficiency of the system’. However, as David Haddock says in Extract 4.2 in response to Epstein, first occupancy is not the only allocation rule that has the virtue of simplicity. Equally simple would be what he calls a ‘mightiest possession’ rule, which allocates the whole stock of the resource in question to the strongest (usually the state), who then parcels it out either by auction or in any other way it considers appropriate. As he points out, this is the way modern societies have actually allocated property rights in previously unowned resources such as radio frequencies and oil fields, and will no doubt allocate property rights in the surface of the moon at some stage. Also, in the case of some resources, the advantages of simplicity are outweighed by the economic inefficiencies in allocation to the first taker. Intellectual property rights, for example, do indeed go to the first taker in one sense, but what the first taker gets is property rights strictly limited in time, for reasons Haddock explains. And, in the case of other resources such as uncultivated land, societies have thought it advisable to require settlers to demonstrate not only enclosure but also cultivation or substantial use as a condition of allocation of property rights (see Notes and Questions 4.1 after the extracts).
4.2.4. Signalling
There are other pragmatic justifications put forward for the first occupancy rule. If those who have taken physical control of a thing automatically acquire property rights in it simply by virtue of being there, occupancy can operate as a useful signalling device, allowing outsiders to assume that occupancy more or less guarantees entitlement. Robert Merrill has suggested this:
Not everyone can do a title search before they act towards apparent property owners as if they, in fact, own the property. For example, all sorts of contractors do work on
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property on the assumption that the person living there actually owns it, and it would be very burdensome to force them to do a title search before they extend those types of services. You have people who lend money on the strength of apparent ownership. You have renters that rent from people whom they think are landlords, and so forth. Adverse possession gives some substance to those kinds of third-party reliance interests by suggesting that the appearance of ownership asserted over a period of time is, in fact, going to be actual ownership.
(Merrill, ‘Time, Property Rights and the Common Law’, p. 681)
Merrill is talking here about wrongful takers (adverse possessors), but much the same point can be made in relation to first occupiers. If entitlement does not go to the first occupier, outsiders have no quick, easy way of ascertaining whether the present occupier has yet done whatever is required to gain entitlement.
4.2.5. The bond between person and possessions
However, there is clearly more to it than pragmatism. It has often been argued that an emotional bond grows between people and the things they regard as theirs, and that this is a tie that ought to be respected by the law. This is essentially the reason David Hume gives in Extract 4.3 for saying that, in an initial allocation of property rights, it would be ‘the most natural expedient’ to allocate property in things to those already in possession of them. Similar points about the bond between person and thing possessed have been made by others. So, for example, Jeremy Bentham said:
Everything which I possess, or to which I have a title, I consider in my own mind as destined always to belong to me. I make it the basis of my expectations, and of the hopes of those dependent upon me; and I form my plan of life accordingly. Every part of my property may have, in my estimation, besides its intrinsic value, a value of affection . . . Everything about it represents to my eye that part of myself which I have put into it – those cares, that industry, that economy which denied itself pleasures to make provision for the future. Thus our property becomes a part of our being, and cannot be torn from us without rending us to the quick.
(Bentham, The Theory of Legislation, Part 1, Chapter 10)
The point is made even more strongly in defence of the adverse possession rule we look at in Chapter 11, where it is argued that over time this bond grows so strong that it justifies allowing the claim of the occupier to defeat even that of the preexisting owner (see in particular Extract 11.2 below).
4.2.6. The libertarian justification
For Epstein, however, the central principled (as opposed to pragmatic) justification for the first occupancy rule is that it means that the state can be excluded from decisions about property allocation. For Epstein, and for other libertarians, this is a matter of fundamental political importance: ‘The rule thus allows one to organise a system of rights that is not dependent on the will of a sovereign, and makes it possible to oppose on normative grounds the all too frequent historical truth that