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Governance Property

Is property a black box? Is it best understood in terms of the relationship between owners and nonowners, without regard to the internal dynamics of property stakeholders? Exclusion theorists of property think that the concept of property properly concerns only the relations between owners and nonowners—that is, the external relationships of owners, or what we might call the “external life” of property. From this perspective, the internal relationships among property stakeholders—the “internal life” of property—are irrelevant from a conceptual point of view, even though these relationships are often very significant to property as a doctrinal matter. To exclusion theorists, all that matters conceptually is the owner’s right to exclude nonowners from using, possessing, or interfering with the owner’s asset. Therefore, what happens within the box—between or among the persons having a property interest in the asset—is of no concern to property law. The law of property, built around the right to exclude, concerns itself primarily with the owner’s relationship with the rest of the world.

This is a distorted and misleading view of property, however. To reveal this misconception, I will distinguish between two types of property, which I call exclusion property (EP) and governance property(GP).

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This Article has two main theses: one is positive, the other normative. The positive thesis is that governance property, not exclusion property, is the dominant mode of ownership today. The rise of governance property reverses what Charles Donahue calls “the agglomerative tendency,” defined as the “tendency to agglomerate in a single legal person, preferably the one currently possessed of the thing that is the object of inquiry, the exclusive right to possess, privilege to use, and power to convey the thing.” I argue that the emergence of GP as the predominant form of property means that the right to exclude can no longer be considered the core of private ownership. The right to exclude, although important, is not central to GP; rather, internal governance mechanisms are essential. The exclusion theory of property cannot account for GP; at best, it can only account for EP. EP is Blackstonian property, man-in-his-castle property, owner-versus-the-world property. Therefore, EP involves only external relationships with third parties and raises no internal governance issues because all rights and privileges are consolidated in one person. By contrast, GP involves both types of issues—internal governance and external relations. The internal governance issues may be quite complex as com-pared to issues involving the multiple owners’ relations with third parties. Because dealing with third parties is less complicated, the right to exclude is less central to GP than it is to EP.