University of Michigan Law School University of Michigan Law School Scholarship Repository Articles Faculty Scholarship 2001 The Liberal Commons Hanoch Dagan University of Michigan Law School, [email protected] Michael A. Heller University of Michigan Law School, [email protected] Available at: https://repository.law.umich.edu/articles/1469 Follow this and additional works at: https://repository.law.umich.edu/articles Part of the Law and Economics Commons, Law and Philosophy Commons, and the Property Law and Real Estate Commons Recommended Citation Heller, Michael A. "The Liberal Commons." H. Dagan, co-author. Yale L. J. 110, no. 4 (2001): 549-623. This Article is brought to you for free and open access by the Faculty Scholarship at University of Michigan Law School Scholarship Repository. It has been accepted for inclusion in Articles by an authorized administrator of University of Michigan Law School Scholarship Repository. For more information, please contact [email protected]. Article The Liberal Commons Hanoch Dagant and Michael A. Hellertt CONTENTS I. INTRODUCTION ................................................................................... 551 II. TRAGIC CHOICE IN PROPERTY THEORY .............................................. 555 A. A Typology of Property Forms ..................................................... 555 1. The Standard Conceptual Map .............................................. 555 a. Private Property .............................................................. 556 b. Commons Property .......................................................... 556 c. State Property .................................................................. 557 2. Focusing the Debate .............................................................. 558 B. Commons Tragedy as Privatization Foil ..................................... 559 1. From Demsetz ... ................................................................. 559 2. .. to Recent Law and Economics ........................................ 561 C. Commons Tragedy as Communitarian Foil ................................. 564 1. From Taylor . ...................................................................... 564 2. .. to Ostrom ........................................................................ 565 t Visiting Professor, University of Michigan Law School; Senior Lecturer in Law and Jurisprudence, Tel Aviv University Law School. tt Olin Senior Fellow, Columbia Law School; Professor, University of Michigan Law School. We wish to thank Omri Ben-Shahar, Bob Ellickson, Jeff Gordon, Sharon Hannes, Don Herzog, Rick Hills, Rob Howse, Sandy Kedar, Jim Krier, Jeff Lehman, Rick Lempert, Paul Mahoney, Tali Margalit, Sallyanne Payton, Rick Pildes, Carol Rose, Bill Simon, and Jeremy Waldron. Thanks also to many generous colleagues at faculty workshops at the Bar-Ilan, Columbia, Duke, Fordham, Hebrew, ·Michigan, Tel Aviv, Texas, Vanderbilt, and Virginia law schools, at the Tenth Annual Meeting of the American Law and Economics Association, and at the Graduate Institute for International Studies in Geneva. Abigail Carter, Carolyn J. Frantz, and Christie Oberg provided heroic research assistance throughout this project; we also thank Dina Kallay and Martin Zimmerman for their able research and translation support. Thanks to Trudy Feldkamp and Mary Wright for secretarial support and to the Cook Endowment at the University of Michigan Law School for generous research funding. 549 550 The Yale Law Journal [Vol. 110: 549 III. A THEORY OF THE LIBERAL COMMONS ............................................. 566 A. Identifying the Goals .................................................................... 567 l. Preserving Exit ...................................................................... 567 a. Why Exit Matters ............................................................. 567 b. Is Entry Like Exit? ........................................................... 570 2. Promoting Cooperation ......................................................... 572 a. Maximizing Economic Gains .......................................... 572 b. Recognizing Social Value ................................................ 572 c. Reconciling Economic and Social Values ....................... 57 4 3. Do Exit and Cooperation Conflict? ....................................... 574 4. Putting Law in Its Place ........................................................ 577 a. Law as a Safety Net That Catalyzes Trust.. ..................... 577 b. The Penalty Default Alternative ...................................... 580 B. The Three Spheres of a Liberal Commons ................................... 581 1. The Sphere of Individual Dominion ....................................... 582 a. Policing Overuse ............................................................. 583 b. Preventing Underinvestment ........................................... 586 c. Sharing Fruits and Revenues .......................................... 589 2. The Sphere of Democratic Self-Governance ......................... 590 a. The Virtues of Mobilizing Voice ...................................... 590 b. Jurisdictional Boundary Norms ...................................... 591 c. Procedural Norms ........................................................... 594 d. Promoting Tailor-Made Adjustments .............................. 596 3. The Sphere of Cooperation-Enhancing Exit .......................... 596 a. The Many Faces of Exit ................................................... 596 b. Restraints Can Enhance Cooperation ............................. 597 c. Alienation vs. Dissolution ............................................... 598 d. Three Mechanisms .......................................................... 598 IV. TRAGIC CHOICE IN AMERICAN CO-OWNERSHIP................................. 602 A. The Disappearance of Black Rural Landowners ......................... 603 1. An Initial Caveat to This Fraught Example ........................... 603 2. The Rise and Fall of Heir Property ....................................... 604 3. Community-Destroying Exit .................................................. 606 B. How Law Can Dissolve Tragic Choice ........................................ 609 1. The Sphere of Individual Dominion ....................................... 611 a. American Law ................................................................. 611 b. Comparative Perspective ................................................ 613 2. The Sphere of Democratic Self-Governance ......................... 614 a. American Law ................................................................. 614 b. Comparative Perspective ................................................ 615 3. The Sphere of Cooperation-Enhancing Exit .......................... 616 a. American Law ................................................................. 616 b. Comparative Perspective ................................................ 618 4. A Final Comparison: The British Turn ................................. 620 v. CODA ................................................................................................... 622 2001] The Liberal Commons 551 I. INTRODUCTION Following the Civil War, black Americans began acqumng land in earnest; by 1920 almost one million black families owned farms. Since then, black rural landownership has dropped by more than 98% and continues in rapid decline-there are now fewer than 19,000 black-operated farms left in America. 1 By contrast, white-operated farms dropped only by half, from about 5.5 million to 2.4 million. 2 Commentators have offered as partial explanations the consolidation of inefficient small farms and intense racial discrimination in farm lending.3 However, even absent these factors, the unintended effects of old-fashioned American property law might have led to the same outcome. Because black farmers often did not make wills, their heirs took the land as co-owners. Over generations, co-owners multiplied, the farms became unmanageable, and the land was partitioned and sold, a seemingly inevitable "tragedy of the commons" in which too many owners waste a common resource.4 Black rural landownership may seem a dusty topic, peopled with hardscrabble tales of property past. Consider, though, the daunting possibility that property future-think biomedical research, post-apartheid restitution, hybrid residential associations, perhaps cyberspace-may have the same analytic structure, be subject to a similar punishing legal regime, and face the same fate as the black rural landowner. Overcoming the tragic fate of commons property should not be so hard. Until now, however, legal theorists have often worked within a framework that makes happier solutions difficult to imagine. Typically, theorists have relied on a thin utilitarian language yoked to a narrow conceptual map of property. One school, worrying that rational owners will overconsume commons resources, has embraced the so-called Blackstonian image of private property with "sole and despotic dominion" at the core.5 Another school, after showing how small, close-knit groups can successfully conserve commons resources if they sharply restrict exit, has advocated a version of commons property.6 For both schools, the image of tragic 1. See infra Section IV.A (discussing the black fann example in detail). See generally U.S. COMM'N ON CIVIL RIGHTS, THE DECLINE OF BLACK FARMING IN AMERICA 3 tbl.1.1 (1982) [hereinafter BLACK FARMING] (describing this decline and its causes);