Demsetz and Property Rights

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Source: Editorial in Literature of Liberty: A Review of Contemporary Liberal Thought was published first by the Cato Institute (1978-1979) and later by the Institute for Humane Studies (1980-1982) under the editorial direction of Leonard P. Liggio.


Harold Demsetz's “Toward a Theory of Property Rights,” American Economic Review (May 1967, reprinted in Eirik G. Furobotn and Svetozar Pejovich, eds., The Economics of Property Rights, 1974) is a major contribution to the economists' approach to property rights. In his essay, Demsetz drew on important historical and anthropological information to illuminate the development of property rights among native Americans. What is important here is a talented economist's sensitive use of this historical material. Demsetz applies the research of scholars concerned with seventeenth-century, eastern-Canadian Indian societies to describe the Indians' recognition of property rights in the animals hunted for the fur trade. Drawing on some of the same historical sources which John Locke had earlier used in the seventeenth century to formulate his own understanding of property rights—French Missionary reports on Indian societies, such as the Jesuit Relations—historians have been able to describe the nature of property rights among the different tribes of native Americans. Demsetz summarized the significance of property rights concepts for the fur hunting tribes:

Forest animals confine their territories to relatively small areas, so that the cost of internalizing the effects of husbanding these animals is considerably reduced. This reduced cost, together with the higher commercial value of fur-bearing animals, made it productive to establish private hunting lands. Frank G. Speck finds that family proprietorship among the Indians of the Peninsula included retaliation against trespass. Animal resources were husbanded. Sometimes conservation practices were carried on extensively. Family hunting territories were divided into quarters. Each year the family hunted in a different quarter in rotation, leaving a tract in the center as a sort of bank, not to be hunted over unless forced to do so by a shortage in the regular tract.

To conclude our excursion into the phenomenon of private rights in land among the American Indians, we note one further piece of corroborating evidence. Among the Indians of the Northwest, highly developed private family rights to hunting lands had also emerged—rights which went so far as to include inheritance.

For orientation in the bibliography of Indian property in agricultural land, one might begin with Bruce G. Trigger, The Huron: Farmers of the North (Case Studies in Cultural Anthropology, 1969). For long periods, many of the European settlements in the New World depended on Native American agricultural activities to sustain their existence. Attention should be drawn to the important works on the hunting and trading of furs referred to in the following studies: Francis Jennins, The Invasion of America (1975); Harold A. Innis, The Fur Trade in Canada (1964); Frederick Jackson Turner, “The Character and Influence of the Indian Trade in Wisconsin” (in Kellogg, ed., Early Writings, 1938); John M. Cooper, “Land Tenure among the Indians of Eastern and Northern North America,” Pennsylvania Archeologist (1938); John M. Cooper, “Is the Algonquian Family Hunting Ground System Pre-Columbian?” American Anthropologist, N.S. (1939); Frank G. Speck and Loren C. Eiseley, “Significance of Hunting Territory Systems of the Algonquian in Social Theory,” Am. Anthro. N.S. (1939); William Cristie MacLeod, “The Family Hunting Territory and Lenape Political Organization,” Am. Anthro. N.S. (1922); Anthony F.C. Wallace, “Political Organization and Land Tenure among the Northeastern Indians, 1600–1830,” Southwestern Journal of Anthropology (1957); Bruce Tigger, “Jesuits and the Fur Trade,” Ethnohistory (1965); M.K. Bennett, “The Food Economy of the New England Indians, 1607–1675,” Journal of Political Economy (1955); Gordon M. Day, “The Indian as an Ecological Factor in the Northeastern Forest,” Ecology (1953); Frank G. Speck and Ralph W. Dexter, “Utilization of Marine Life by the Wampanoag Indians of Massachusetts,” Journal of the Washington Academy of Sciences (1948); and Alvin M. Josephy, Jr. The Indian Heritage of America (1968).

When the English immigrants landed in North America, they were welcomed by the Indians, who gladly taught them agricultural methods. Although the immigrant farmers lived in peace with the Indians, immigrant officials insisted on imposing the hegemony of the settlers' government over the Indians. Government officials authorized themselves to “own” by government grant large tracts of land which they did not improve or develop; they also hoped to force future immigrants to pay them for these usurped lands. These tracts contained the lands on which the Indians were settled and had carried out their industries of farming, fishing, and hunting. The officials who “owned” these lands used governmental power to remove the Indians for failure to pay them rents. No conflicts arose over settlement by immigrants or private property in land claimed by individual farmers. The conflicts arose due to the usurping claims of government authority over the Indians and their lands.

Harold Demsetz's essay suggests the value of further research to examine the early history of European settlement in the New World, with attention to the role of private property in Native American societies. Future research could study from this property-rights framework the disutilities, injustices, and ecological disorder created by the intrusion of European government models into the relations of property-owning Native Americans and property-owning European immigrants. The advantages of a private property model for conserving and developing natural resources is spelled out in the following bibliographical essay.