Wednesday, September 18, 2013

Render on "Complexity in Property"

Meredith Render (Alabama Law) has posted "Complexity in Property" on SSRN. Here is the abstract:
This article illuminates the largely misunderstood relationship between complexity and the regulation of property interests. Specifically, the article presents the "complexity thesis" -- a novel explanatory account of the principle of numerus clausus. The principle of numerus clausus is an ancient common law rule which prohibits the customization of property interests. The complexity thesis holds that the primary function of numerus clausus is to prevent the proliferation of highly idiosyncratic property interests. In so doing, numerus clausus provides a bulkhead against the overwhelming complexity that would ensue if customized property interests were permitted. 
For the last fifteen years, numerus clausus has been the subject of a spirited colloquy in which property theorists of all methodological stripes have sought to unravel some of the mysteries that surround the principle. This article carefully engages several prominent explanatory accounts of numerus clausus, and demonstrates that while these competing accounts supply a number of important insights about the principle, the complexity thesis does a better job of accounting for all of the salient features of the principle without sacrificing coherence or consilience. 
Finally, the complexity thesis is especially instructive today, as the 2007 collapse of the housing market can largely be traced to a set of basic misapprehensions about the destructive power of complexity in the context of highly alienable interests. The complexity thesis demonstrates that standardization serves an essential epistemic function. Standardization makes it possible for us to better apprehend risk, and thereby avoid catastrophic miscalculations such as those that led to the housing collapse.
The article is very interesting and well-written. As someone who questions the basic property/contract distinction that is supposedly represented by the in rem-in personam distinction and the numerus clausus, I can't say I found Meredith's argument entirely persuasive. For example, she claims that credit default obligations (CDOs) (among other disastrously complex financial instruments) are mere contracts and "not property," but she doesn't provide any real arguments in support of that conclusion. In a general sense, CDO contracts are about allocating ownership (in a legitimate sense of that word) of risk. She even concedes that a CDO is both alienable and valuable. In addition, I assume (though she doesn't come right out and tell us) that CDOs are subject to exclusive possession, so that a legal action would lie for their misappropriation or expropriation. Thus, they look and act a lot like property. Merely calling them contracts does not mean property-based rights and obligations do not apply.

Moreover, it is a category mistake to say that some thing is or is not property. Things aren't property. Property denotes sets of rights and duties applicable to things (including intangible things). So, even if CDOs are not themselves property, there may be - and I would suggest are - property rights in CDOs (just as their are property rights in pollution emissions allowances even though Congress has explicitly disclaimed that such allowances constitute property, see here, p. 291).

If I am right that CDOs are an object of property (rights and duties that are good against not only the contracting parties but many people, perhaps everyone in the world, who is not a party to the contract), then the numerous clausus and its simple and presumably exclusive set of property categories really cannot be said to have saved us from undesirable complexity in legal relationships. To the contrary, if the rights and obligations appertaining to CDOs are in the nature of property, it just goes to show that the numerus clausus has lost whatever (contested) significance it ever had in the law of property (as if that loss of significance were not already clear enough from the rise of the law of trusts).

No comments:

Post a Comment

I actively moderate comments for spam, advertisements, and abusive or offensive language.