Coase-Sandor Working Paper Series in Law and Economics
Most people’s entitlements are protected by a property rule, which means that their holders can sell them for a price. But some important entitlements are protected by an inalienability rule, and hence cannot be sold under any circumstances. For example, people cannot sell their organs. In most jurisdictions, women cannot be surrogate mothers for a fee (only for reimbursement of costs). People cannot sell their right not to be exposed to highly life-threatening conditions. Most constitutional rights are not transferrable. People cannot reassign their legal entitlements to social benefits provided by the government. Tort victims in many jurisdictions cannot sell their rights to sue. Finally, neither individuals nor governments can sell some types of cultural property to foreigners or to foreign governments.
In this Article, we propose and develop an intermediate rule for protecting entitlements—a middle ground between property and inalienability rules—that we call the “Limited Inalienability Rule” (LIR). Under this rule, the holder of the entitlement is free to transfer her entitlement but still possesses an inalienable right to revoke the transfer (or the agreement to transfer) at a later stage, with no penalty. We show that this rule currently exists with respect to a few entitlements, and we suggest that it be employed in additional areas of law. We demonstrate that on many occasions, an LIR serves as a sensible compromise between property and inalienability rules, and can be justified on efficiency and justice grounds.
Ariel Porat & Stephen D. Sugarman, "Limited Inalienability Rules," Coase-Sandor Working Paper Series in Law and Economics, No. 841 (2018).