Gary D. Libecap

Titles, Conflict, and Land Use: The Development of Property Rights and Land Reform on the Brazilian Amazon Frontier

The Amazon, the worlds largest rain forest, is the last frontier in Brazil. The settlement of large and small farmers, squatters, miners, and loggers in this frontier during the past thirty years has given rise to violent conflicts over land as well as environmental duress. Titles, Conflict, and Land Use examines the institutional development involved in the process of land use and ownership in the Amazon and shows how this phenomenon affects the behavior of the economic actors. It explores the way in which the absence of well-defined property rights in the Amazon has led to both economic and social problems, including lost investment opportunities, high costs in protecting claims, and violence. The relationship between land reform and violence is given special attention. The book offers an important application of the New Institutional Economics by examining a rare instance where institutional change can be empirically observed. This allows the authors to study property rights as they emerge and evolve and to analyze the effects of Amazon development on the economy. In doing so they illustrate well the point that often the evolution of economic institutions will not lead to efficient outcomes. This book will be important not only to economists but also to Latin Americanists, political scientists, anthropologists, and scholars in disciplines concerned with the environment. Lee Alston is Professor of Economics, University of Illinois, and Research Associate for the National Bureau of Economic Research. Gary Libecap is Professor of Economics and Law, University of Arizona, and Research Associate for the National Bureau of Economic Research. Bernardo Mueller is Assistant Professor, Universidade de Brasilia.

The Influence of Private Contractual Failure on Regulation: The Case of Oil Field Unitization

An analysis of the interdependence between regulation and private contractual failure reveals that the feasible range of regulation is restricted by the same forces that block private agreement. The focus of the study is oil field unitization regulation in Oklahoma, Texas, and Wyoming (federal lands) from 1948 through 1975. Despite large potential gains from unitization, private negotiations fail because of lease heterogeneities and information problems regarding lease value estimates. In response, the federal and state governments have adopted strikingly different policies to encourage unitization with different results. Only the federal governments regulations are effective because they surmount information problems. Texas has the least successful regulation. The paper argues that the policy differences are due to the political influence of small firms that benefit from nonunitized production. 25 references, 2 tables.

Economic Variables and the Development of the Law: The Case of Western Mineral Rights

Much of American legal activity during the eighteenth and nineteenth centuries centered on the transfer of a continent of natural resources—agricultural land, water, timber, mineral deposits—from public to private control. That transfer was crucial for the development of an economic system based largely on private incentives and market transactions. Legal policy at both the state and federal level regarding natural resource ownership and use has been the focus of work by Paul W. Gates, Willard Hurst, Harry Scheiber, and others. Those studies have generally been aimed at describing the nature and impact of governmental support for private economic activities. This paper is concerned with a somewhat different question—the timing and emergence of particular legal institutions (laws and governments). The framework for the study is that offered by Lance Davis and Douglass North in Institutional Change and American Economic Growth. There they hypothesize that institutions develop in response to changing private needs or profit potentials: “It is the possibility of profits that cannot be captured within the existing arrangemental structure that leads to the formation of new (or the mutation of old) institutional arrangements.†Essentially the same model of institutional change is used by some American legal historians, notably Lawrence Friedman and Willard Hurst. They argue that the law can only be understood by examining the surrounding economic, political, and social conditions. Those conditions mold the law, and as they change, they force legal institutions to change. Friedman ties this view closely to the Davis-North model in A History of American Law, where he argues that competing interest groups are the primary determinants of the nature of the law at any one time. This view of legal institutional change is in sharp contrast to the common law tradition of legal history which sees the law as an autonomous institution passed on from generation to generation—an institution that molds the economic, political, and social inputs from society.

An Integrated Assessment of Water Markets: A Cross-Country Comparison

This article presents an integrated framework for assessing water markets in terms of their institutional foundations, economic efficiency, and environmental sustainability. This framework can be a tool for (a) comparing different water markets, (b) tracking performance over time, and (c) identifying ways in which water markets might be adjusted by policy makers to achieve desired goals. The framework is used to identify the strengths and limitations of five water markets: (a) Australia’s Murray-Darling Basin, (b) the western United States, (c) Chile (in particular the Limarí Valley), (d) South Africa; and (v) China (in particular, the North). The framework helps identify which of these water markets are currently able to contribute to integrated water resource management, which criteria underpin these markets, and which features of these markets may require further development. The findings for each market, as well as comparisons between them, provide general insights into water markets and how water governance can be improved.

Property rights in economic history: Implications for research

Property rights institutions underlie the performance and income distribution in all economies. By defining the parameters for the use of scarce resources and assigning the associated rewards and costs, the prevailing system of property rights establishes incentives and time horizons for investment, production, and exchange. Since property rights define the behavioral norms for the assignment and use of resources, it is possible to predict how differences in property rights affect economic activity. That linkage is critical in research in economic history for understanding variations in growth and welfare across societies and time. The comparative’ statics of assessing the impact of property rights institutions on economic performance are complicated because causality also runs in the opposite direction. Competitive forces tend to erode institutions that no longer support economic growth. Changing market conditions exert pressure for dynamic adjustments in the existing rights structure through refinement of rights and privileges or their transfer to others (voluntarily or through coercion) to facilitate responses to new economic opportunities. Predictions regarding the way in which property rights arrangements respond over time to changing economic opportunities, however, must carefully consider political or equity factors, Distributional conflicts arise when property rights are coercively redistributed by the

A Model of Rural Conflict: Violence and Land Reform Policy in Brazil

In this paper we analyze the underlying determinants of rural land conflicts in Brazil involving squatters, landowners, the federal government, the courts and INCRA, the land reform agency. We present a model where squatters and landowners strategically choose to engage in violence to advance their aims. Landowners use violence as a means of increasing the likelihood of successful eviction of squatters, and squatters use violence to increase the probability that the farm will be expropriated in their favor as part of the government?s land reform program. We test the model?s predictions using state-level data for Brazil for 22 states from 1988 through 1995 that we have assembled. The tests reveal that the government?s land reform policy, which is based on expropriation and settlement projects, paradoxically may be encouraging both of the major antagonists to engage in more violence, rather than reducing conflicts. If true, the existing land reform policy should be reconsidered because it is in conflict with the government?s efforts to reduce violent land disputes.

The tragedy of the commons: property rights and markets as solutions to resource and environmental problems

In one way or another, all environmental and natural resource problems associated with overexploitation or under provision of public goods, arise from incompletely defined and enforced property rights. As a result private decision makers do not consider or internalize social benefits and costs in their production or investment actions. The gap between private and social net returns results in externalities – harmful effects on third parties: overfishing, excessive air pollution, unwarranted extraction or diversion of ground or surface water, extreme depletion of oil and gas reservoirs. These situations are all examples of the ‘The Tragedy of the Commons’. In this paper, I consider options for mitigating the losses of open access: common or group property regimes, government tax and regulation policy, more formal private property rights. I briefly summarize the problems and advantages of each option and describe why there has been move toward rights-based instruments in recent years: ITQ (individual transferable quotas), tradable emission permits, and private water rights. Introductions to the papers in the special issue follow.

State Regulation of Open-Access, Common-Pool Resources

Open-access, common-pool resources, such as many fisheries, aquifers, oil pools, and the atmosphere, often require some type of regulation of private access and use to avoid wasteful exploitation. This paper summarizes the arguments and literature associated with this problem. The historical and contemporary record of open-access resources is not a happy one, and many of the problems persist, despite large aggregate gains from resolving them. The discussion here suggests why that is the case. The paper focuses on government responses to the common pool, the private and political negotiations underlying them, and the information and transaction costs that influence the design of property rights and regulatory policies. Understanding the type of institution that emerges and its effects on the commons depends upon identifying the key parties involved, their objectives, and their political influence. Further, it requires detailed analysis of the bargaining that occurs within and across groups. The paper summarizes the open-access problem and provides case analyses of regulation of common-pool fisheries, oil reservoirs, and the atmosphere. The final section summarizes the general themes and the advantages of the New Institutional Economics (NIE) approach to analyzing the common pool.

Land, property rights and privatization in Brazil

The settlement of the Amazon has attracted considerable attention due to its environmental and economic consequences. It is, however, not an entirely new phenomena, but the last stage of a long process of frontier settlement which started in other regions almost 500 years ago. The section on privatization of land describes the historical process through which land was occupied in Brazil and identifies a pattern which has been repeated in each new frontier region involving the interrelationships between land prices, property rights and agricultural investment. This pattern has recurred in the Amazon frontier, whose settlement ever since the sixties has been directly influenced by governmental policy. Land policy in the Amazon examines governmental policy and some of its consequences with emphasis on the supply of property rights in land. As has been the case throughout Brazilian history, land policy in the Amazon has rarely achieved its objectives. This has occurred not only because of the difficulties in enforcing and monitoring policy, but also to a lack of understanding of the role of property rights and other forces which shape incentives for the use and disposal of land. Property Rights in the Amazon shows how the lack of secure property rights in land has been connected to many of the problems which have arisen throughout the settlement of the Amazon.

Property Rights, Nineteenth-Century Federal Timber Policy, and the Conservation Movement

In campaigning for the establishment of the National Forests in the late nineteenth century, conservationists pointed to fraud and timber theft in the Pacific Northwest. In this paper we argue that the conservationists were misdirected; that it was a costly Federal land policy that encouraged fraud and theft. In the face of restrictive land laws, fraud was necessary if lumber companies were to acquire large tracts of land to take advantage of economies of scale in logging. Since fraud used real resources, it raised the actual cost of acquiring land and thus delayed the establishment of property rights. Such delays led to theft. The paper examines the public land laws, explains their selection by claimants, and calculates the added transaction costs or rent dissipation that resulted from circumventing the law.