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Abstract:
This paper, forthcoming in the New Palgrave Dictionary of Economics and the Law, summarizes the common-pool problem faced in oil and gas production under the rule of capture. It defines unitization as a solution to the problem and then describes the bargaining issues involved in arriving at a unitization agreement. Legal issues and cases are included.

Abstract:
This paper, forthcoming in the New Palgrave Dictionary of Economics and the Law, summarizes the common-pool problem faced in oil and gas production under the rule of capture. It defines unitization as a solution to the problem and then describes the bargaining issues involved in arriving at a unitization agreement. Legal issues and cases are included.

Abstract:
We examine Harold Demsetz's (1967) prediction that property rights would emerge and be refined once the benefits of doing so exceeded the costs. We follow the gradual development of property rights to subsurface oil and gas deposits in the United States through private and political negotiations to test this prediction. The pattern has been influenced by technological change, shifts in relative prices, information asymmetries, and political factors. All in all, the pattern of property rights development for oil and gas described follows the broad outlines sketched Demsetz. But the details of the bargaining process, the importance of information asymmetries and price volatility, and the key role of politics have resulted in property rights structures that would not have been predicted in a strict neo-classical sense. Our analysis provides insights regarding the industry practice of crafting unitization agreements that distinguish between multiple participating areas and/or time-phases of extraction. Completing these agreements often is plagued by high transactions costs, and the state has intervened to force unitization. But we argue that under certain circumstances this action may not improve welfare.

Property Rights, rule of capture, prorationing, unitization

Abstract:
We examine land reform policies and their implications for violent conflict over land and resource use in the Brazilian Amazon. We identify the protagonists (land owners and squatters), derive their incentives to use violence, and show the role of legal inconsistencies as a basis for conflict. Although civil law guarantees title for land owners, the Brazilian Constitution adds a beneficial use criterion as a condition for title enforcement. This provision is part of a land reform or redistribution effort and it provides authorization for transfers to squatters. We describe the government agency involved in land reform, INCRA, and show that its intervention critically affects the actions of both squatters and land owners. Further, we point out the resource use effects of land reform policies and associated insecure property rights to land.

Abstract:
Rising urban and environmental demand for water has created growing pressure to re-allocate water from traditional agricultural uses. But, for a variety of reasons, water markets are more complicated than are those for other resources. In this paper, we first explain these differences by examining water rights and regulatory issues. Second, we place our research in the context of other economics literature on water marketing. Third, we present new, comprehensive data on prices and the extent, nature, and timing of water transfers across 12 western states from 1987-2005. Prices are higher for agriculture-to-urban trades versus within-agriculture trades, in part, reflecting the differences in marginal values between the two uses. Prices higher for urban use are also growing relative to agricultural use over time. Markets are responding. The number of agriculture-to-urban transactions is rising over time, whereas the number of agriculture-to-agriculture transfers is not. Further, there is a shift from using short-term leases to using multi-year leases of water and permanent sales of water rights. This pattern underscores the need to consider the amounts of water obligated over time, rather than examining only annual flows in assessing the quantities of water traded as is the common practice in the literature. Considering committed water, we find that more is transferred and the direction of trading is different than if the focus is on annual flows. Finally, the data reveal considerable variation in water trading across the states.

Water, Water Law, Trade in Water, Land Use, Property Rights

Abstract:
There is a large and growing literature on scientific estimates and regulatory instruments associated with international efforts to control greenhouse gas (GHG) emissions. The underlying collective action processes have received much less attention. In particular, bargaining among sovereign states and the associated domestic public choice issues that must be addressed as part of an agreement have been neglected. This paper examines the problems of international cooperation when the aggregate benefits and costs of the objective, as well as the net gains to the bargaining parties, are uncertain. Uncertainty arises due to basic information problems about the effects of the treaty and compliance by sovereign countries. We outline a two-stage analytical framework that describes the positions taken by representatives of negotiating countries and the internal public choice tradeoffs facing politicians when constituents are differentially affected by the treaty. We apply the framework to the Law of the Sea Treaty of 1982 (LOS), the Montreal Protocol to Control Substances that Damage the Ozone Layer of 1987, and the Kyoto Protocol of 1997. Similar international negotiation and internal constituency issues were faced in the first two treaties that provide implications for the success of international collective action to address possible global warming.

Abstract:
This paper extends the existing theory and empirical investigation of unitization contracts. It highlights the importance of incentive-compatibility and self-enforcement and the bargaining problems faced in achieving viable, long-term contracts. We argue that only if the parties to a unitization contract have unit production shares that are the same as their cost shares will the contract be incentive compatible. Using a data base of sixty unit operating agreements, we measure the industry's actual behavior against the principles of production from a common pool. Our survey of units that have only one production phase and that are relatively homogeneous reveals that such equal sharing rules are always found and they appear to encourage the parties to behave optimally. In more complex units with multiple production phases and/or separate concentrations of oil and gas (gas caps) we find deviations from the theoretical ideal. In the case of multi-phase units, we find equal cost and production shares within phases, but not across phases. A pre-set trigger for shifting from one production phase to the next helps to maintain optimal behavior. For gas cap units, however, we generally do not find the equal sharing rule. Conflicts and rent dissipation follow as illustrated by the case of the Prudhoe Bay Unit. The paper describes the desirable contract rules for avoiding moral hazard. It also shows how the effects of those rules can be replicated in difficult situations.

Abstract:
This article extends the existing theory and empirical investigation of unitization contracts. It highlights the importance of incentive-compatibility and self-enforcement and the bargaining problems faced in achieving viable, long-term contracts. We argue that only if the parties to a unitization contract have unit production shares that are the same as their cost shares will the contract be incentive compatible. Using a database of 60 unit operating agreements, we measure the industry`s actual behavior against the principles of production from a common pool. Our survey of units that have only one production phase and that are relatively homogeneous reveals that such equal sharing rules are always found and they appear to encourage the parties to behave optimally. In more complex units with multiple production phases and/or separate concentrations of oil and gas (gas caps) we find deviations from the theoretical ideal. In the case of multiphase units, we find equal cost and production shares within phases, but not across phases. A preset trigger for shifting from one production phase to the next helps to maintain optimal behavior. For gas cap units, however, we generally do not find the equal sharing rule. Conflicts and rent dissipation follow as illustrated by the case of the Prudhoe Bay Unit. The article describes the desirable contract rules for avoiding moral hazard. It also shows how the effects of those rules can be replicated in difficult situations.

Abstract:
This paper extends the existing theory and empirical investigation of unitization contracts. It highlights the importance of incentive-compatibility and self-enforcement and the bargaining problems faced in achieving viable, long-term contracts. We argue that only if the parties to a unitization contract have unit production shares that are the same as their cost shares will the contract be incentive compatible. Using a data base of sixty unit operating agreements, we measure the industry's actual behavior against the principles of production from a common pool. Our survey of units that have only one production phase and that are relatively homogeneous reveals that such equal sharing rules are always found and they appear to encourage the parties to behave optimally. In more complex units with multiple production phases and/or separate concentrations of oil and gas (gas caps) we find deviations from the theoretical ideal. In the case of multi-phase units, we find equal cost and production shares within phases, but not across phases. A pre-set trigger for shifting from one production phase to the next helps to maintain optimal behavior. For gas cap units, however, we generally do not find the equal sharing rule. Conflicts and rent dissipation follow as illustrated by the case of the Prudhoe Bay Unit. The paper describes the desirable contract rules for avoiding moral hazard. It also shows how the effects of those rules can be replicated in difficult situations.

Abstract:
New Institutional Economics (NIE) focuses on the interaction between legal (formal and informal) institutions and economic behavior. Both directions of causality concern researchers in the field: how institutions influence economic behavior and how economic factors affect institutional change. As such, the NIE abandons standard neoclassical economics assumptions that individuals have perfect information about the market and important current or future events, as well as the assumption that transaction costs of exchange are zero. As a result, NIE introduces observed organization and information costs to neoclassical analysis, thereby providing more analytical richness and power for examining empirical activities. Institutions, such as written contracts, charters, constitutions, laws, and even unwritten norms and codes of behavior are devised to reduce information uncertainty and transaction costs. If effective, these institutions can promote efficiency by encouraging investment, production, and trade.

Institutions, especially laws and regulatory arrangements, may also be used to redistribute income, or be part of rent-seeking activities. If ineffective, these institutions may result in inefficiencies and reduced investment, production, and trade. At the same time, individuals engage in collective action as a response to exogenous changes in relative prices to make institutions more effective in promoting economical activities.

In the spirit of the NIE, we examine the interactions among regulation, property rights, and water markets in California from 1987-2005. We are interested in whether and how the definition of water rights and the regulation of water transfers has affected observed market activity in: the extent and pattern of water trades, their duration, and the nature of the contracts used (short-term leases, long-term leases, and sales).

There is growing pressure to re-allocate fresh water from historical uses in agriculture, where as much as eighty percent of water has been used, to meet greater water demands in urban areas, recreation (i.e. fishing and boating), and environmental requirements (i.e. protect endangered species and repairing aquatic and riparian habitats). Fresh water supplies are limited with little or no new sources, so meeting new demands necessarily requires re-allocation. Markets are institutional options for achieving such re-allocation. Land markets, for example, fairly smoothly and routinely shift land resources from one use (farming) to another (housing). But water is a more complicated resource than land. Due to its physical mobility, water cannot be easily bounded or partitioned across claimants and uses, making it more difficult to define and enforce property boundaries and rights. As a result, exclusion is extremely difficult and numerous parties typically access the same water either simultaneously or sequentially. Because it is difficult to segment water into its various concurrent or chronological uses, there is often a high degree of interaction among water claimants and applicants. For these reasons, water trading among some parties can have important and negative effects on others.

For instance, consider an upstream irrigator who diverts water for farming purposes. Only part of the water will be used, with the remainder percolating back through the ground to aquifers, streams, or to ditches for repeated access by other parties in the same watershed or basin. If the first farmer were to sell some or all of her water and ship it out of the basin for urban use, the unconsumed residual or tail water would no longer be available for use by subsequent claimants or environmental uses. They would lose access to water and be harmed by the trading process.

Accordingly, any trades that change the location of water diversion, nature of use, and timing, especially if they are large relative to the stream flow, are restricted by state law and regulated by state agencies. Because of the potential for harm, transfers of surface water rights in western states are predicated on there being "no harm or injury" to downstream rights holders. State water agencies, such as the California State Water Resources Control Agency, typically allow trades that involve changes in diversion and location only for historical consumptive uses (water that would not be available to subsequent users in any event) in order to minimize these negative third-party effects. In contrast, local, short-term water transfers among neighboring users, such as irrigators, typically do not require state approval because the water stays nearby and any changes are of limited duration.

California laws and regulations, as defined by the state legislature, courts, and administrative agencies, may promote water market transactions if they: (1) clarify the definition and enforcement of private water rights so that ownership is obvious; (2) streamline and make transparent the regulatory process; and (3) limit third-party protests to well-defined criteria and short time periods. Alternatively, California law may retard or change the duration and type of transactions if water rights are weakened and/or the regulatory process is made more complicated. For instance, California law could affect the relative costs and benefits of using particular contracts (leases relative to sales), and the length of transactions (short term versus long term or permanent) by the nature of the regulatory process.

In this Article, we examine the water market activities in California between 1987 and 2005 and analyze how the changes in the definition of water rights and regulation have influenced the extent and nature of water trading.

New Institutional Economics, NIE, water markets, water rights, water transfers, water trades

Abstract:
This paper, forthcoming in the New Palgrave Dictionary of Economics and the Law, describes the phenomena of common property and the incentive issues it raises. Various solutions to potential rent dissipation are outlined as are the bargaining problems associated with designing and implementing each arrangement. Both legal and economic issues are included.

Abstract:
The process of assigning property rights to land in the American Great Plains resulted in farms that were too small to be economically viable. These farms were prime contributors to the Dust Bowl of the 1930s. The path dependence resulting from the initial assignment of property rights on the Great Plains was slow to be corrected. The transactions costs of property rights reallocation from homesteads to larger farms were high, in part due to government intervention. Local politicians sought to retain the dense, Midwest-like population base that homestead settlement had fostered, and they successfully lobbied the Federal Government for subsidies to maintain small family farms. The result was a halting process of farm size adjustment between 1920 and 1982. This case illustrates the difficult economic problems that can be raised by an inappropriate assignment of property rights. It cannot be assumed that a more efficient allocation of rights with fewer negative effects will occur quickly.

Property rights, Coase, Dust Bowl

Abstract:
We examine government cartelization efforts in crude oil production. Texas and Saudi Arabia are alleged to act as swing producers to maintain the interstate (1933-1972) and OPEC (1973 on) oil cartels respectively. We analyze the political constraints that affected the ability of Texas and Saudi Arabia to act as residual producers within their respective cartels. In the case of Texas, political factors molded individual firm production quotas, advantaging high-cost producers and hence, reducing total cartel net profits. Further, Texas had limited range for adjusting total state production to maintain interstate output at levels consistent with target prices. Saudi Arabia's role as swing producer within OPEC raises similar questions regarding how cartel output is shared among members, and the extent to which domestic economic and political pressures coming from various member countries may undermine the effectiveness of the cartel. OPEC's coordination problem has been more difficult than that faced by the interstate cartel for a variety of reasons that we explore. Even so, they have not kept the OPEC members in general, and Saudi Arabia in particular, from exerting a strong influence on the level of world oil prices.

Abstract:
We examine the potential inability of voluntary unitization to remedy common property losses associated with oil field development. Unlike the traditional literature, we show that if the field contains two (or more) substances that differ in kind (like oil and gas), then it is possible that non-unitized forms of ownership and operation (with conflicted production incentives) may dominate unitized development of the resource. More specifically, it may be impossible to identify any plan of unitized development that is not pareto-dominated by initial endowments or other non-unitized production arrangements which the parties might devise. These results cast the role of the regulatory agency in a new light. Whereas compulsory unitization has tended to be viewed as a uniformly helpful form of outside influence that succeeds by reducing or overcoming the deadweight cost of bargaining, from our perspective it could also be seen as forcing on the parties a "solution" that unavoidably harms one or more of them.

Abstract:
In this paper we examine how an interest group with limited resources (votes and campaign contributions) nevertheless effectively influenced political policy through the control of information to general voters. Voters in turn lobbied politicians to take actions desired by the interest group. Our focus is on the Landless Peasants Movement (Movimento Sem-Terra) or MST and its success in invigorating land reform in Brazil. Although we direct attention to the MST, our analysis can be generalized to interest group behavior in other settings.

Landless Peasant Movement, MST, Interest groups, multiprincipal, multitask, land reform

Abstract:
We provide a new and more complete analysis of the origins of the Dust Bowl of the 1930s, one of the most severe environmental crises in North America in the 20th Century. Severe drought and wind erosion hit the Great Plains in 1930 and lasted through 1940. There were similar droughts in the 1950s and 1970s, but no comparable level of wind erosion. We explain why. The prevalence of small farms in the 1930s limited private solutions for controlling the downwind externalities associated with wind erosion. Drifting sand from unprotected fields damaged neighboring farms. Small farmers cultivated more of their land and were less likely to invest in erosion control than were larger farmers. Soil Conservation Districts, established by government after 1937, helped coordinate erosion control. This "unitized" solution for collective action is similar to that used in other natural resource/environmental settings.

externalities, common-pool, wind erosion, unitization

Abstract:
In current discussions of western water policy, the early-20th century water deal between Los Angeles and landholders in Owens Valley, Calif., plays a prominent and decidedly negative role. It is used as a metaphor by opponents of water reallocations to demonstrate all that can go wrong with water markets. The allegations are that Owens Valley water was stolen from farmers by a rapacious Los Angeles and, once it was shipped out of the valley through the Los Angeles Aqueduct, the agricultural economy was ruined and the valley was left a wasteland. Unfortunately for the development of water markets and the smooth reallocation of water, the story is wrong. The water was neither stolen nor was the farm economy left in ruins.

Owens Valley, water policy, water deal, water reallocation, water markets, Los Angeles Aqueduct, agricultural economy, farm economy

Abstract:
I re-examine the notorious Owens Valley water transfer to Los Angeles, which is a pivotal episode in the political economy of contemporary western water allocation. Negotiated between 1905 and 1935, it remains one of the largest voluntary water sales in U.S. history. It made the growth of semi-arid Los Angeles possible, increasing the city's water supply by over 4 times. Water rights were bundled with the land so that the Los Angeles Water Board had to purchase nearly 1,000 small farms. The negotiations between property owners and the agency were complicated. There often were lengthy disputes over farm characteristics, amounts of water conveyed, and valuation of both land and water. Bilateral monopoly emerged between sellers' pools and the Board. During bargaining impasses, the aqueduct was periodically dynamited. Today, the outcome of the Owens Valley water exchange is viewed as very one sided - one of "theft" by Los Angeles. As such, it discourages contemporary transfers of water from agricultural to urban areas. Using new qualitative and quantitative evidence, especially for 1924-34, when most water-bearing land was purchased, I examine the sources of bargaining conflicts, the timing of sales, the distribution of the gains from trade, and offer a new assessment of the results of the transfer. Implications for current water rights negotiations are drawn.

Abstract:
In this Article I examine the notorious Owens Valley water transfer to Los Angeles. Not only was it one of the largest private water exchanges in U.S. history, but it remains pivotal in the political economy of western water reallocation. It involved negotiations over land and water rights between representatives of the city of Los Angeles and approximately eighteen hundred farmers and town lot owners between 1905 and 1935. By 1935, Los Angeles had acquired 95 percent of the farm acreage and 88 percent of the town properties in the valley. The water transferred from Owens Valley, a marginal agricultural area, made possible the growth of Los Angeles, and Owens Valley remains the largest single source of water for the Los Angeles Basin. Yet, the Owens Valley transfer has a very negative legacy and has hindered subsequent efforts to reallocate water from agriculture to urban and environmental uses. The negotiations for water rights and land took thirty years to complete and were often acrimonious. I analyze the negotiations between representatives of Los Angeles and Owens Valley farmers to determine the sources of bargaining conflicts. I also evaluate the economic impact of the exchange on both parties to show that each party was made substantially better off. Yet, the notion of "theft" remains. To explain this, I examine the distribution of the economic benefits of the water and land sale. Distributional issues take on greater importance when there are valuation disputes and the gains from trade are shared very unequally. With these insights, I conclude with lessons for contemporary western water reallocation.

water

Abstract:
The effect of the Berger Entrepreneurship Program at the University of Arizona from 1985 through 1988 is examined by comparing graduates of the school who participated in the program with a matched sample of non-entrepreneurship business graduates from the same school. Also evaluated are the effects of the program regarding technology transfer from the university to the private sector; the effect of the program on private donations to the business college; and the educational effect of the entrepreneurial curriculum on other disciplines of the college.

Results indicate that entrepreneurship education fosters risk-taking and the creation of new business ventures; increases the likelihood of graduates being self-employed; causes a significant positive impact on the income of graduates; increases job satisfaction from increased income; contributes to the growth of businesses, especially small ones; promotes the transfer of technology from the university to the private sector; and promotes technology-based firms and products.

A survey of 34 deans, department heads, and development officers at the university, reveals that educational innovations in the entrepreneurship program improve the curriculum of other business disciplines and the MBA program at the school.

Entrepreneurship education, Technology transfer, Self-employment, Risk orientation, Firm growth, Wealth

Abstract:
Rising urban and environmental demand for water has created growing pressure to re-allocate water from traditional agricultural uses. The evolution of water markets has been more complicated than those for other resources. In this paper, we first explain these differences by examining water rights and regulatory issues. Second, we place our research in the context of the economics literature on water marketing. Third, we present new, comprehensive data on prices and the extent, nature, and timing of water transfers across 12 western states from 1987-2005. We find that prices are higher for agriculture-to-urban trades versus within-agriculture trades, in part, reflecting the differences in marginal values between the two uses. Prices for urban use are also growing relative to agricultural use. Markets are responding in that the number of agriculture-to-urban transactions is rising, whereas the number of agriculture-to-agriculture transfers is not. Further, there is a shift from using short-term leases to using multi-year leases of water and permanent sales of water rights. This pattern underscores the need to consider the amounts of water obligated over time, rather than examining only annual flows in assessing the quantities of water traded as is the common practice in the literature. Considering water obligated over time, termed committed water, we find significantly more is transferred and the direction of trading is different than if the focus is on annual flows. Finally, the data reveal considerable variation in water trading across the states.

Abstract:
We examine three theories of Progressive Era regulation: public interest, industry capture, and information manipulation by the federal bureaucracy and muckraking press. Based on analysis of qualitative legislative histories and econometric evidence, we argue that the adoption of the 1906 Pure Food and Drugs Act was due to all three factors. Select producer groups sought regulation to tilt the competitive playing field to their advantage. Progressive reform interests desired regulation to reduce uncertainty about food and drug quality. Additionally, rent-seeking by the muckraking press and its bureaucratic allies played a key role in the timing of the legislation. We also find that because the interests behind regulation could not shape the enforcing agency or the legal environment in which enforcement took place, these groups did not ultimately benefit from regulation in the ways originally anticipated.

Abstract:
Between 1905 and 1934 over 869 farmers in Owens Valley, California sold their land and associated water rights to Los Angeles, 250 miles to the southwest. This agriculture-to-urban water transfer increased Los Angeles' water supply by over 4 times, making the subsequent dramatic growth of the semi-arid city possible, generating large economic returns. The exchange took water from a marginal agricultural area and transferred it via the Los Angeles Aqueduct. No other sources of water became available for the city until 1941 with the arrival of water from Hoover Dam via the California Aqueduct. The Owens Valley transfer was the first and last, large-scale voluntary market exchange of water from agriculture to urban. Despite gains to both parties from the re-allocation of water to higher-valued uses, the Owens Valley transfer serves today as a metaphor, cautioning any agricultural region against water sales to urban areas. In this paper I examine the bargaining involved in the Owens Valley water transfer to determine why it was so contentious and became so notorious. I focus on valuation disputes, bi-lateral monopoly, and third party effects. I also examine the impact of the transfer on Owens Valley and Los Angeles land owners. The results suggest gains to both groups. Broader conclusions for bargaining, when the aggregate gains from trade are enormous, but distribution very skewed, are drawn.

Abstract:
The New Deal increased the amount and breadth of agricultural regulation in the economy, shifting it from providing public goods and transfers to controlling supplies and directing government purchases to raise prices, and created the institutional structure to continue the new regulation long after the crisis ended. Agricultural laws passed by Congress and the President from 1884 through 1970 are classified as to whether they provided public goods, gave direct and indirect transfers, or engaged in economic regulation. Additionally, laws enacted from 1940 through 1970 are classified as to whether or not they were linked to specific New Deal agricultural programs. The hypothesis is tested that absent the Great Depression and New Deal, the pattern of agricultural regulation with public goods and transfers that existed prior to 1933 would have continued through 1970. Budget appropriations for economic regulation of agricultural commodities are assembled and categorized as demand enhancement and supply control to analyze how the New Deal affected regulatory expenditures relative to what existed prior to 1933. Additionally, staffing and budgets for the U.S. Department of Agriculture and domestic wheat prices are examined to determine if they were changed by New Deal policies from 1933 through 1970 compared to the pre-New Deal period. International comparisons are made to determine how the U.S. regulatory experience compared to that in other western industrial countries.

Abstract:
This paper examines the economic effects of the two dominant land demarcation systems: metes and bounds (MB) and the rectangular system (RS). Under MB property is demarcated by its perimeter as indicated by natural features and human structures and linked to surveys within local political jurisdictions. Under RS land demarcation is governed by a common grid with uniform square shapes, sizes, alignment, and geographically-based addresses. In the U.S. MB is used principally in the original 13 states, Kentucky, and Tennessee. The RS is found elsewhere under the Land Ordinance of 1785 that divided federal lands into square-mile sections. We develop an economic framework for examining land demarcation systems and draw predictions. Our empirical analysis focuses on a 39-county area of Ohio where both MB and RS were used in adjacent areas as a result of exogenous historical factors. The results indicate that topography influences parcel shape and size under a MB system; that parcel shapes are aligned under the RS; and that the RS is associated with higher land values, more roads, more land transactions, and fewer legal disputes than MB, all else equal. The comparative limitations of MB appear to have had negative long-term effects on land values and economic activity in the sample
area.

Abstract:
This paper examines the origins and economic effects of the two dominant land demarcation systems: metes and bounds (MB) and the rectangular system (RS). Under MB property is demarcated by its perimeter as indicated by natural features and human structures and linked to surveys within local political jurisdictions. Under RS land demarcation is governed by a common grid with uniform square shapes, sizes, alignment, and geographically-based addresses. In the U.S. MB largely is used in the original 13 states, Kentucky, and Tennessee. The RS is found elsewhere under the Land Ordinance of 1785 that divided federal lands into square-mile sections. We develop an economic framework for examining land demarcation systems and draw predictions. Our empirical analysis focuses on a 39-county area of Ohio where both MB and RS were used in adjacent areas as a result of exogenous historical factors. The results indicate that topography influences parcel shape and size under a MB system; that parcel shapes are aligned under the RS; and that the RS is associated with higher land values, more roads, more land transactions, and fewer legal disputes than MB, all else equal. The comparative limitations of MB appear to have had negative long-term effects on land values and economic activity in the sample area.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Abstract:
The Meat Inspection Act of 1891 and the Sherman Act of 1890 are shown to be closely tied. This link makes clearer Congress' intent in enacting the legislation. Both laws were products of conditions in the economy after 1880, and they reflected in part, a common concern about the Chicago packers, or Beef trust. The concerns of local slaughterhouses, which were being displaced by new, low-cost refrigerated beef, and of farmers, who sold their livestock to the large Chicago packers, were echoed elsewhere by other small businesses and farmers, who feared for their competitive positions during a time of structural change in the economy.

Abstract:
In addressing environmental and natural resource problems, there is a move away from primary reliance upon centralized regulation toward assignment of property rights to mitigate the losses of open-access. I examine the assignment of private property rights during the 19th and early 20th centuries to five natural resources, mineral land, timberland, grazing and farm land, and water on federal government lands in the Far West. The region was richly endowed with natural resources, but assigning property rights to them required adaptation from established, eastern practices as defined by the federal land laws. The property rights that emerged and their long-term welfare effects provide a laboratory for examining current questions of institutional design to address over-fishing, excessive air pollution, and other natural resource and environmental problems. A major lesson is that property rights allocations based on local conditions, prior use, and unconstrained by outside government mandates were most effective in addressing not only the immediate threat of open-access, but in providing a longer-term basis for production, investment, and trade. Another lesson is how hard it is to repair initial faulty property allocations. Accordingly, path dependencies in property rules are real, and they have dominated the economic history of resource use in the West.

Abstract:
In the late 19th and early 20th centuries, the North American agricultural frontier moved for the first time into semi-arid regions where farming was vulnerable to drought. Farmers who migrated to the region had to adapt their crops, techniques, and farm sizes to better fit the environment. But there was very incomplete information for making these adjustments, and ultimately they were insufficient: too many small, dry land wheat farms were founded, only to be abandoned in the midst of drought. In this paper, we examine why homestead failure occurred in the Great Plains, by analyzing two episodes in western Kansas in 1893-94 and in eastern Montana in 1917-21. We focus on the weather information problem facing migrants to the region. We examine the learning process by which migrants mis-interpreted new rainfall information and failed to adequately perceive drought. Homesteaders had neither an analytical framework nor sufficient data for predicting fluctuations in rainfall. Knowledge of the climate was primitive and the underlying mechanisms triggering droughts were not understood. Long-term precipitation records did not exist. Homesteaders gambled on the continuation of previous wet periods due to a possible climate change because of cultivation, and on the optimistic opinions of dryfarming experts.' Dryfarming doctrine argued that moisture could be saved in the soil, allowing small wheat farms to endure any dry period. Accordingly, homesteaders discounted new information that indicated drought. The subsequent waves of homestead busts that swept the region during severe droughts were part of the adjustment toward agricultural techniques, crops, and farm sizes more appropriate for a semi-arid region.

Abstract:
This paper provides new empirical results regarding the demand and supply of title, its impact on land value, and its effects on agricultural investment on Brazilian frontiers. We use survey data from 1992 and 1993 from the state of Par with data on the characteristics of the settlers, land tenure, land agencies involved, land values, and investment. We then turn to census data from the Brazilian agricultural census from 1940 through 1985, with observations at the municipio (county) level to examine the development of property rights to land in the southern state of Paran during the agricultural boom between 1940 and 1970 and in the Amazon state of Par during the period of rapid migration to the region after 1970. By examining frontiers we can follow the rise in land values, the increase in the demand for title, and the response of government. The empirical findings support the predictions of the theory regarding the effects of title and investment on land value, the role of expected change in value on demand for title, and the contribution of title in promoting investment. Governments, however, have not exactly followed the predictions of the analytical framework in supplying title. Political and bureaucratic factors play an important role in the government response to demands for title. This result suggests that researchers must pay special attention to the complex political process by which property rights are assigned in studying the emergence of tenure institutions.

Abstract:
This paper provides new empirical results regarding the demand and supply of title, its impact on land value, and its effects on agricultural investment on Brazilian frontiers. We use survey data from 1992 and 1993 from the state of Para with data on the characteristics of the settlers, land tenure, land agencies involved, land values, and investment. We then turn to census data from the Brazilian agricultural census from 1940 through 1985, with observations at the municipio (county) level to examine the development of property rights to land in the southern state of Parana during the agricultural boom between 1940 and 1970 and in the Amazon state of Para during the period of rapid migration to the region after 1970. By examining frontiers we can follow the rise in land values with movement toward a market center, the associated increase in demand for title, and the response of government to those demands. The empirical findings generally support the predictions of the theory regarding the effects of title and investment on land value; the role of expected change in value in increasing demand for title; and the contribution for title for promoting land-specific investment. Governments, however, have not exactly followed the predictions of the analytical framework in supplying title. Political and bureaucratic factors play an important role in the government response to demands for title. This result suggests that researchers must pay special attention to the complex political process by which property rights are assigned in studying the emergence of tenure institutions. The research contributes both to narrower issues of economic development and to broader questions of institutional change.

Abstract:
We provide a new and more complete analysis of the origins of the Dust Bowl of the 1930s, one of the most severe environmental crises in North America in the 20th Century. Severe drought and wind erosion hit the Great Plains in 1930 and lasted through 1940. There were similar droughts in the 1950s and 1970s, but no comparable level of wind erosion. We explain why. The prevalence of small farms in the 1930s limited private solutions for controlling the downwind externalities associated with wind erosion. Drifting sand from unprotected fields damaged neighboring farms. Small farmers cultivated more of their land and were less likely to invest in erosion control than were larger farmers. Soil Conservation Districts, established by government after 1937, helped coordinate erosion control. This 'unitized' solution for collective action is similar to that used in other natural resource/environmental settings.

Abstract:
Worldwide supplies of fresh water are increasingly scarce relative to demand. This problem is likely to be exacerbated with climate change. In this paper, we examine water markets in both Australia’s Murray Darling Basin and the western US and their prospects for addressing water scarcity. The two regions share a number of important similarities including: climate variability that requires investment in reservoirs to make water available in low-rainfall periods; the need for internal and cross-border (state) water management; an historical major allocation of water to irrigators; increasing competition among different uses (agricultural, environmental and recreational in situ uses, urban demand); and the potential for water trading to more smoothly and quickly allocate water across these competing uses. A comparison of the two regions provides important insights about how economic factors can encourage more efficient water allocation, market structure and government regulation.

Abstract:
Even though formal property rights are the theoretical response to open access involving natural and environmental resources, they typically are adopted late after considerable waste has been endured. Instead, the usual response in local, national, and international settings is to rely upon uniform rules and standards as a means of constraining behavior. While providing some relief, these do not close the externality and excessive exploitation along unregulated margins continues. As external costs and resource values rise, there finally is a resort to property rights of some type. Transfers and other concessions to address distributional concerns affect the ability of the rights arrangement to mitigate open-access losses. This paper outlines the reasons why this pattern exists and presents three empirical examples of overfishing, over extraction from oil and gas reservoirs, and excessive air pollution to illustrate the main points.

Abstract:
In the move to adopt rights based arrangements for renewable resources to avoid the losses of open access and the inefficiencies of prescriptive regulation, we argue that grandfathering the allotments of local users can be the most efficient distribution mechanism. We differ from the standard support among economists for auctions which contends that auctions allocate rights to the highest valued users and thereby maximize rents. Our contention is that rents are not a fixed stock as is commonly assumed, but rather depend upon the actions of those who use the natural resource and convert it into valuable goods and services. First-possession allocation assigns ownership and rents to existing users, reinforcing their incentives for stewardship and rent maximization. Resource rents are an important source of wealth and well being, especially in developing countries. By contrast the alternative, auction allocation, assigns ownership to winning bidders, but the rents are captured by the auctioneer, often the state, not local agents. We argue that there can be important efficiency effects. Our empirical focus is on fisheries, but the implications extend to other settings.

Abstract:
Rising urban and environmental demand for water has created growing pressure to reallocate water from traditional agricultural uses. The evolution of water markets has been more complicated than those for other resources. In this paper, we first explain these differences by examining water rights and regulatory issues. Second, we place our research in the context of the economics literature on water marketing. Third, we present new, comprehensive data on prices and the extent, nature, and timing of water transfers across 12 western states from 1987 to 2005. We find that prices are higher for agriculture-to-urban trades versus within-agriculture trades, in part, reflecting the differences in marginal values between the two uses. Prices for urban use are also growing relative to agricultural use. Markets are responding in that the number of agriculture-to-urban transactions is rising, whereas the number of agriculture-to-agriculture transfers is not. Further, there is a shift from using short-term leases to using multi-year leases of water and permanent sales of water rights. This pattern underscores the need to consider the amounts of water obligated over time rather than examining only annual flows in assessing the quantities of water traded as is the common practice in the literature. Considering water obligated over time, termed committed water, we find significantly more is transferred and the direction of trading is different than if the focus is on annual flows. Finally, the data reveal considerable variation in water trading across the states.

Abstract:
Greater historical perspective is needed to enlighten current debate about future human responses to higher temperatures and increased precipitation variation. We analyze the impact of climatic conditions and variability on agricultural production in five semi-arid western states. We assemble county-level data on dams and other major water infrastructure; agricultural crop mixes and yields; precipitation and temperature; soil quality, and topography. Using this extensive data set, we analyze the impact of water infrastructure investments on crop mix and yields in affected counties relative to similarly-endowed counties that lack such infrastructure. We find that water infrastructure smoothes agricultural crop production and increases the likelihood of a successful harvest, especially during times of severe drought or excessive precipitation.

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Abstract:
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.

Abstract:
We examine the implications of the public trust doctrine in natural resource protection and conservation. A model of litigation and settlement among disputing parties suggests that the public trust doctrine introduces more costs and is more time consuming than would be the case with alternative approaches, such as the purchase of private rights through market transactions or application of eminent domain powers to reallocate the resource. Because the doctrine allows for uncompensated redistribution, it is resisted by current resource owners. Furthermore, by providing open standing to members of the public in challenging existing uses, public trust disputes encourage excessive demands, increasing the incidence of trial over settlement. This outcome is exacerbated if the plaintiffs derive utility from the cause and provide litigation services at below-market rates, leading to greater investment in litigation. The costs of the public trust doctrine appear to have limited its application beyond the level anticipated by proponents. We present a case study of Mono Lake, part of the well-known 1983 litigation, National Audubon v. Superior Court to illustrate our arguments.

Abstract:
The success of the University of Arizona’s BergerEntrepreneurship Program is evaluated by comparing 460 Berger graduates with2,024 non-entrepreneurship business graduates.Survey respondents wereasked to provide, among other things, their employment history, net worth, andinformation about their current positions.It is found that BergerEntrepreneurship graduates make more money, are more likely to launch newbusiness ventures, and are more likely to be self-employed thannon-entrepreneurship graduates.Berger alumni are also more likely to workfor fast-growing, high-tech companies than other alumni. Entrepreneurship contributes to risk-taking and the formation of newventures. For instance, entrepreneurship graduates are three times morelikely than other business graduates to start a new business. Moreover,entrepreneurship education contributes to the growth of firms, and has asignificant impact on the income of graduates. The findings also indicatethat entrepreneurship education promotes the transfer of technology from theuniversity to the private sector, promoting technology-based firms andproducts. Entrepreneurship education benefits both graduates and the companiesthey work for or head. (SAA)

University of Arizona Berger Entrepreneurship Program, Income, Technology transfer, Colleges & universities, Startup rates, Entrepreneurship education, Career choices, Risk orientation, Self-employment, Firm performance

Abstract:
This collection of essays presents leading work on intellectual property, examining how to create incentives to develop new technologies, how to protect them once developed, and when valuable property might be developed even under weak ownership conditions. "Procuring Knowledge," by Stephen M. Maurer and Suzanne Scotchmer catalogues and considers the efficacy of some incentive schemes to stimulate creativity and innovation, especially for basic scientific research, as a means to elicit investments in new knowledge. In "Economic Perspectives on Open Source," Josh Lerner and Jean Tirole consider the economics of open source software development and tentatively answer why individual programmers and commercial companies engage in it, despite the absence of intellectual property protection. "Submarines and Technological Innovation: U.S. Continuation Patenting in Software and Biotechnology Technologies in the 1980s and 1990s," by Stuart J. H. Graham and David C. Mowery, examines the role and purpose of "continuations" within biotechnology and software patents and the context of U.S. patenting during 1987-1999, and the efforts to curb such "submarine patenting." In "Firm Strategies and Trends in Patent Litigation in the United States," Deepak Somaya examines the strategic uses of patents and firms' motives to litigate. "Crossing the Great Divide: Using Adverse Possession to Resolve Conflicts Between the Antitrust and Intellectual Property Regimes," by Constance E. Bagley and Gavin Clarkson, explores the related questions when must a patent or copyright holder allow others to use that intellectual property and can the holder hinder another firm from succeeding in a related market? In "Incomplete Contracting and the Structure of R&D Joint Venture Contracts," Suzanne E. Majewski and Dean V. Williamson empirically examine contract design related to structures of joint R&D agreements and show how contracts can be incomplete and governance can matter. In "Will MP3 Downloads Annihilate the Record Industry? The Evidence So Far," Stan J. Liebowitz concludes MP3 downloads are hurting the recording industry, but the effect is not as large as claimed by the industry. Whether the impact will be fatal is not clear. "Strategies That Work When Property Rights Don't," by Bharat Anand and Alexander Galetovic, offers a taxonomy of strategies firms use to cope with weak property rights. The challenges facing the entertainment industry are shared by other industries. The authors show when a particular strategy works; success depends on characteristics of the asset and the firm. (TNM)

Joint ventures, Entertainment industry, Contracts & agreements, Copyrights, Internet, Biotechnology industry, Litigation, Patents, Software industry, Intellectual property, Incentives

Abstract:
I examine a complicated bargaining problem in the acquisition of private land and water rights by Los Angeles in Owens Valley. This is a pivotal episode in the political economy of contemporary western water. More broadly, Owens Valley provides empirical evidence on how the gains from exchange were divided among the parties and how equity concerns shaped the process and succeeding assessment of market allocation. Negotiations for key properties took place within a bilateral monopoly context, and the bargaining strategies of both parties raised the transaction costs of exchange and formed fairness perceptions about the outcome of the exchange. I analyze the bargaining environment and estimate the determinants of when properties sold and the prices paid for land and water. Farmers who colluded did better by selling the properties than if they had remained in agriculture. Their “cartels,” however, were not strong enough to secure more of the surplus from reallocating water from agriculture to urban demand. Most of the gains went to Los Angeles landowners, and this is a source of the notion of water “theft” that continues today. (JEL D02, D23, D49, D74, K11, L13, N52, Q15, Q25)

Abstract:
In this paper we examine land reform policies and their implications for violent conflict over land and resource use in the Brazilian Amazon. We identify the protagonists (land owners and squatters), derive their incentives to use violence, and show the role of legal inconsistencies as a basis for conflict. Although civil law guarantees title for land owners, the Brazilian Constitution adds a beneficial use criterion as a condition for title enforcement. This provision is part of a land reform or redistribution effort and it provides authorization for transfers to squatters. We describe the government agency involved in land reform, INCRA, and show that its intervention critically affects the actions of both squatters and land owners. Further, we point out the resource use effects of land reform policies and associated insecure property rights to land. Forested lands on large farms do not meet the constitutional beneficial use criterion and hence, are vulnerable to invasion by squatters and redistribution by INCRA. In the contest for control, land owners and squatters have incentives to deforest more rapidly and extensively prior to a conflict than agricultural production alone would warrant in order to demonstrate their respective land use. In analyzing the determinants of violent conflict, an analytical framework is provided to generate hypotheses for testing. Using data from the Brazilian census and the Pastoral Land Commission for the state of Para we examine the characteristics of regions where violent conflict predominates. Our empirical results indicate that a greater policy emphasis on land reform in Brazil through expropriation to reduce violent conflict, may have the unanticipated effect of increasing violent competition and wasteful resource use. The results of the paper are suggestive not only for Brazil, but for elsewhere in Latin America where there is tension between the goals of secure property rights and wealth redistribution.

Abstract:
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.

Abstract:
This paper presents theoretical extensions and laboratory tests of the Hoffman and Libecap (1994) model of individual firm incentives to form agricultural marketing pools. The key incentives are lower variance in output prices and economies in scale in marketing. This paper extends the model by allowing firms to have heterogeneous risk attitudes over uncertain profits via the tools of Bayes-Nash equilibrium. An experimental design is conducted to test the theoretical implications of this model. Statistical analysis of the experimental data using random effects probit models supports the model that incorporates heterogeneous risk attitudes that are private information. Furthermore, the statistical analysis reveals a stylized fact: strategic uncertainty leads to more noise around the Bayes-Nash equilibrium of environments that posses economies of scale for pool participants. This is evidence that economy of scale arguments for pooling may not be as empirically strong as previously believed.