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

Published online by Cambridge University Press:  11 May 2010

Gary D. Libecap  and
Ronald N. Johnson
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Abstract

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.

“Government control of cutting on all timberland, private as well as public, is still today, as it was then, the one most indispensable step toward assuring a supply of forest products for the future in the United States.”

Type
Papers Presented at the Thirty-Eighth Annual Meeting of the Economic History Association
Information
The Journal of Economic History , Volume 39 , Issue 1 , March 1979 , pp. 129 - 142
Copyright
Copyright © The Economic History Association 1979

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References

1 Pinchot, Gifford (Chief of the U.S. Forest Service 1890-1910), in Breaking New Ground (New York, 1947Google Scholar; rpt., Seattle, 1972), p. 120.

2 The term “dissipation of rent” has been used previously by Cheung to denote the consequences of non-exclusive income that results from rent and price controls. Cheung, Steven N. S., “A Theory of Price Control,” Journal of Law and Economics, 17 (04 1974), 53–72Google Scholar.

3 Barzel provides an analysis of the dissipation of rents through queueing; Barzel, Yoram, “A Theory of Rationing by Waiting,” Journal of Law and Economics, 17 (04 1974), 73–96CrossRefGoogle Scholar.

4 In some cases, such as mining, Congress adopted local property rights arrangements, but in general it imposed the standards designed for farm ownership to non-agricultural land. For discussion of the development of Federal mining policy, see Libecap, Gary D., “Economic Variables and the Development of the Law: The Case of Western Mineral Rights,” this JOURNAL, 38 (06 1978), 338–62Google Scholar.

5 For a discussion of all three laws see U.S. Senate, Committee on Public Lands, Public Lands Statutes of the U.S. (Washington, D.C., 1916)Google Scholar.

6 Discussions of fraud in timber claims are included in the following: Cameron, Jenks, The Development of Governmental Forest Control in the United States (Baltimore, 1928), pp. 219–60Google Scholar; Dana, Samuel, Forest and Range Policy: Its Development in the United States (New York, 1956), p. 30Google Scholar; Gates, and Swenson, Robert, History of Public Land Law Development (Washington, D.C., 1968), pp 531–61Google Scholar; , Pinchot, Breaking New Ground, pp. 79–84Google Scholar.

7 See , Cameron, Forest Control, p. 106Google Scholar; Allen, Shirley W., An Introduction to American Forestry (New York, 1950), pp. 264–66Google Scholar; , Dana, Forest and Range Policy, p. 72Google Scholar; and Robbins, R. M., Our Land Heritage: The Public Domain 1776-1936 (Princeton, 1942), p. 302Google Scholar.

8 For a discussion of timber famine predictions see Olson, Sherry, The Depletion Myth (Cambridge, Mass., 1971)CrossRefGoogle Scholar.

9 Before the late nineteenth century and the rise of the conservation movement, most officials called for the establishment of private property rights as a means of safeguarding the nation's timber. See the 1880 Public Lands Commission Report, House Executive Document, no. 46, 46 Congress, 2 Ses sion, p. xxxi.

10 Copp, Henry N., Public Land Laws (Washington, D.C., 1883), p. 19Google Scholar.

11 House Executive Documents, no. 282, 50 Congress, 1 Session.

12 Stumpage (standing timber) prices used in this study are those compiled by Steer, Henry B., Stumpage Price of Privately Owned Timber in the United States, U.S. Department of Agriculture, Technical Bulletin no. 626 (Washington, D.C., 1938), Table 22Google Scholar.

13 The equation is not meant to capture all ramifications of failure to obtain title. If fraudulent activity was detected by the government there was a possibility of a jail sentence and fine. See for example Putter, S. A. D., Looters of the Public Domain (Portland, 1907Google Scholar; rpt., New York, 1972).

14 Assuming that

then the functional relationship between P and q (equation 2) is U-shaped. A minimum for P can be obtained by differentiating the right-hand side of equation 2 with respect to q and setting it equal to zero.

Utilizing equation 2 in the text we can solve the above equation for P, the value that land will be equal to at the time it is claimed. Given the objective of individual wealth maximization, then only when P = P will it be true that equation l(b) is equal to zero.

15 To test the hypothesis that land was claimed sequentially, as well as to point out the importance of stumpage price changes in land claims, the annual number of acres transferred under the Timber and Stone Act in California, Oregon, and Washington from 1891 to 19IS was regressed against the change in stumpage prices, a constant, and the number of acres transferred lagged by one year. Using the number of acres transferred lagged by one year introduces a distributed lag effect for changes in stumpage prices on acreage claimed. Estimation provided the following results.

YT = 28478 + 9315XT +.588YT-1

(t statistic) (2.152) (3.869)

Where YT = number of timber claims;

YT-1 = number lagged by one year;

XT = change in stumpage prices from the previous

year R2=.518

No. of observations: 25

For similar results on agricultural land see North, Douglass, The Economic Growth of the United States, 1790-1860 (New York, 1966), pp. 73-74, 124, 136–37Google Scholar.

16 For a discussion of collateral see Benjamin, Daniel K., “The Use of Collateral to Enforce Debt Contracts,” Economic Inquiry, 16 (07 1978), 333CrossRefGoogle Scholar.

17 House Executive Document, no. 282, 50 Congress, 1 Session.

18 In comparison to the roundabout way in which timber companies had to acquire land from the government, Frederick Weyerhaeuser was able to purchase directly over 900,000 acres from the Northern Pacific Railroad. Hidy, Ralph, Hill, Frank, and Nevins, Allen, Timber and Men: The Weyerhaeuser Story (New York, 1963)Google Scholar.

19 Bribes were not included as they appear to represent income transfers and not resource use.

20 U.S. Department of Interior, Report of the Commissioner of the General Land Office, 1885 (Washington, D.C., 1885), pp. 49–71Google Scholar; Report of the Public Lands Commission, 1905, Senate Document, no. 189, 58 Congress, 3 Session (1905).

21 Using the rent dissipation figures from Table 2, an estimate that half of all entries were fraudulent, and data on the number of entries from General Land Office Reports, 1881-1907, gives a total dissipation figure for the six land offices of $16,711,395. Government sales, calculated from the same sources, were $12,689,466.

22 An alternative to the restrictive land sale policy of the Federal Government could have been to auction off the lands. For a discussion of both the virtues and problems associated with the present system of auctioning off stumpage by the U.S. Forest Service, see Johnson, Ronald N., Competitive Bidding for Federally Owned Timber (Ph.D. diss., Univ. of Washington, 1977)Google Scholar.

23 , Steer, Stumpage Prices, p. 87Google Scholar.

24 The chance of success for Timber and Stone claims was extremely high. See the General Land Office Report, 1904.

25 T' (q) and S' (q) are the marginal products of a dollar's worth of evasion expenditures, q, under each law.

26 Recall, T' (q), S' (q) > 0 and T“(q), S”(q)' < 0; also T(q*) = 0fq'T'(q)dq and S(q**) = ofq**S'(q)dq. Note that T'(q) must cross S'(q) in Figure 2 because T(q) > S(q) for any given q and both approach unity, as q approaches infinity. v

27 For statements hostile to the Act see the General Land Office Report, 1894, p. 95Google Scholar; , Robbins, Our Land Heritage, p. 303Google Scholar; and Ise, John, The United States Forest Policy (New Haven, 1920), p. 77Google Scholar.

28 See Pinchot's statement on the Public Lands Commission Report printed in the General Land Office Report, 1904Google Scholar.

29 The point that price will rise as a stock of renewable resource is depleted follows from analysis of dynamic economic models such as the one offered by Plourde, C. G., “A Simple Model of Replenish-able Natural Resource Exploitation,” American Economic Review, 60 (06 1970), 518–22Google Scholar; Steer, Henry B., Lumber Production in the United States: 1799-1946, U.S. Department of Agriculture, misc. publication (Washington, D.C., 1948)Google Scholar.

30 See , Ise, Forest Policy, p. 73Google Scholar; , Cameron, Forest Control, p. 106Google Scholar; , Dana, Forest and Range Policy, 58Google Scholar; and Hibbard, Benjamin H., A History of the Public Land Policies (New York; 1924Google Scholar; rpt, Madison, 1965), p. 457.

31 U.S. Department of Commerce and Labor, Bureau of Corporations, The Lumber Industry (Washington, D.C., 1913), Part 1, p. xviiiGoogle ScholarPubMed.