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The Case For Imperfect Enforcement Of Property Rights, Abraham Bell, Gideon Parchomovsky

University of Pennsylvania Law Review

A persistent theme in the literature on property rights suggests that perfect state protection of private property rights would provide owners with an optimal incentive to invest in their assets. In this Essay, we challenge this view. Specifically, we argue that in many instances, perfect state protection would result in over-investment in resources. This is because perfect enforcement gives rise to a problem akin to the moral hazard problem that plagues insurance markets. In addition to pointing out this problem, we define the conditions under which it may arise in the real world and discuss the measures law should take …