Property Rights to Frontier Land and Minerals: US Exceptionalism

Abstract

Property rights are the most fundamental institution in any society. They determine who has decision-making authority over assets and who bears the costs and benefits of those decisions. They assign ownership, wealth, political influence, and social standing. They make markets possible; define timelines; and provide incentives for investment, innovation, and trade. They mitigate the losses of open access and provide the basis for long-term economic growth. Economists and economic historians have long recognized the importance of secure property rights for economic outcomes. Other political economy, philosophy, historical, and legal literatures emphasize different, but critical attributes based on how property rights are allocated and to whom. The linkages among the social, political, and economic effects are examined here with respect to US and Latin American frontier land and minerals. Property rights were sharply different across the two frontiers with apparent long-term consequences for economic growth, innovation, wealth distribution, private investment in public goods, as well as social and political stability. The distinct assignment of property rights to land and minerals is likely a basis for long-term US exceptionalism in economic performance, individualism, mobility, and optimism. The mechanisms through which property rights to land in a frontier society affect outcomes in a contemporary, highly urban one are complex. Because property rights to land were broadly distributed, Americans could participate in capital markets using land as collateral. This ability shaped opinions regarding markets, capitalism, and individual opportunity. In the 21st century, these critical attributes may be eroding, inviting more analysis from economists and economic historians. Introduction.The above quotation points to attributes of property rights that are more individualistic, social, and political than are those emphasized in most economic discussions. Nevertheless, there are direct linkages across these characteristics, and emphasizing the relationships is the focus of this Chapter. Attention is directed to frontiers in North and South America where property rights were distributed to land and minerals in very dissimilar ways, seemingly leading to starkly different consequences-economic, political, and social. These varying frontier experiences appear to have had long-term consequences. Frontiers provide a natural experiment because, by definition, they are areas where new rights to resources are emerging. The discussion is based on the existing literature and does not provide tests of hypotheses regarding property rights and various outcomes. Causality between property rights structures and observed variation in immigration patterns, middle class development, innovation, social and political cohesion, individualism, reduced reliance upon the state, private investment in public goods as well as, long-term economic growth seems, however, to be supported by available research.Property rights are the most fundamental inst...

Virtual Parceling

“…In this manner, strong property rights coupled with inadequate landowner resource management may produce subsequent statutory, judicial, and administrative interventions to ensure adequate production (and protection) of public goods. 10 We note, however, that collective action problems manifest with both private and public ownership (Shepsle and Weingast, 1984;Schleifer and Vishny 1993;Heller 1998;Libecap 2018). Owners of individual parcels can hold out against the development of largescale resources and extract rents from develops from projects that have specific spatial requirements.…”