ABSTRACT
This chapter discusses the economic principles that govern how courts should protect ownership rights. There are simple rules of thumb as to when injunctions or damages are appropriate, but they can be misleading in more complicated cases. Whether high or low transaction costs prevail is the primary consideration. Yet, such issues as information asymmetries between the parties, the cost of accessing the legal system, judicial error, and assessment costs that parties experience in seeking and processing information complicate analysis. The fact of property ownership is distinct from the manner in which the law protects it. The law can safeguard entitlements pursuant to a property, liability, or inalienability rule. A property rule triggers injunctive relief, permitting an owner to compel a third-party appropriator to return an item or to end any ongoing incursion. A liability rule entitles a property owner to monetary damages in the event of a taking. The law protects certain fundamental interests with an inalienability rule.
