A foundational argument long invoked to justify stable property rights is that property law must protect settled expectations. Respect for expectations unites otherwise disparate strands of property theory focused on ex ante incentives, individual identity, and community. It also privileges resistance to legal transitions that transgress reliance interests. When changes in law unsettle expectations, such changes are thought to generate disincentives that Frank Michelman famously labeled “demoralization costs.” Although rarely approached in these terms, arguments for legal certainty reflect underlying psychological assumptions about how people contemplate property rights when choosing whether and how to work, invest, create, bolster identity, join a community, and make other decisions at property’s core. More precisely, demoralization is predicated on a kind of paralysis flowing from anxieties about instability, unfair singling out, and majoritarian expropriation that can be sparked in legal transitions. This prevailing psychological portrait of expectations has considerable intuitive appeal and is widely influential. It is, however, distinctly incomplete. This Article offers an alternative picture of the expectations with which people approach property and the corresponding anxieties that might cause people to hesitate. From this perspective, stability is less important than assurances that the legal system will respond when external forces threaten to overwhelm the value owners create, that it will provide a fair process of adjustment over time, and that it will ensure inclusion.
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