Economic Forces in American History Property Rights in Land and the Land Ordinances Economic Forces in American History Organizing Questions What are property rights? How did the American colonists establish property rights in land to begin with? What did the Revolution do to existing property rights? How did Americans allocate property rights to land outside of the original colonies? Economic Forces in American History What are Property Rights? Economists usually think about property as having several dimensions: Right to use Right to exclude Right to derive income from Right to alienate Economic Forces in American History We often think of property rights as an absolute concept: I own something But property rights have multiple dimensions and ownership is often much more complicated. Value is usually connected directly to the kind of property rights associated with things, people, or activities. My car is a bundle of rights: How fast can I drive it, where can I drive it, can I rent it (taxis), can I sell it? Economic Forces in American History From the founding of the colonies until the late 19 th century, the United States was an agrarian economy. The large majority of people were farmers, and most of the output was either farm products or manufactured products made from farm products. Far and away the most important determinant of economic performance until after the Civil War was productivity in agriculture. Economic Forces in American History American Property Rights in Land The first settlers at Jamestown in 1607, were an adventurous lot, motivated by hopes of finding gold and silver, a water passage to the east, and the hope of acquiring land. Their operation was a risky one, made more risky by the continuous warfare between European powers and the hegemony of Spain, particularly the Spanish navy. The colonists wanted protection from the King, in return for which they were quite willing to offer the King a share of the profits from their venture. Economic Forces in American History The Virginia Company charter, issued in 1606 by King James, created the Virginia Company, and granted the company the right to settle land in the Kings name: ...either appertaining unto us, or which are not now actually possessed by any Christian Prince or People, situate, lying, and being all along the Sea Coasts, between four and thirty' degrees of Northerly Latitude from the Equinoctial Line, and five and forty Degrees of the same Latitude, and in the main Land between the same four and thirty and five and forty Degrees, and the Islands thereunto adjacent, or within one hundred Miles of the Coast thereof; Economic Forces in American History The king was to provide the colonists protection, in return for which he was to receive a share of any gold or silver found by the colonists, and a share of the land sales of the colony. Two very important parts of the charter follow. First, everyone who lived in the colony would be a subject of the English King: Economic Forces in American History Also we do, for Us, our Heirs, and Successors, DECLARE, by these Presents, that all and every the Persons being our Subjects, which shall dwell and inhabit within every or any of the said several Colonies and Plantations, and every of their children, which shall happen to be born within any of the Limits and Precincts Of the said several Colonies and Plantations, shall HAVE and enjoy all Liberties, Franchises, and Immunities, within any of our other Dominions, to all Intents and Purposes, as if they had been abiding and born, within this our Realm of England, or any other of our said Dominions. Economic Forces in American History Second, and critically, And all land sold by the Virginia Company would be held in Free and Common Socage: And finally, we do for Us, our Heirs, and Successors, GRANT and agree, to and with the said Sir Thomas Gates, Sir George Somers, Richard Hackluit, Edward-Maria Wingfleld and all others of the said first colony, that We, our Heirs and Successors, upon Petition in that Behalf to be made, shall, by Letters Patent under the Great Seal of England, GIVE and GRANT, unto such Persons, their Heirs and Assigns, as the Council of that Colony, or the most part of them, shall, for that Purpose, nominate and assign all the lands, Tenements, and Hereditaments, which shall be within the Precincts limited for that Colony, as is aforesaid, To BE HOLDEN Of Us, our heirs and Successors, as of our Manor at East-Greenwich, in the County of Kent, in free and common Soccage only, and not in Capite: Economic Forces in American History English Tenure In England, going back to the Norman Conquest, land was held by multiple individuals simultaneously. In principle, the king owned all the land. The kings ownership was allodial. That is, the king owned his land free of any obligations. Major lords held their land directly from the king, usually in return for military service. Economic Forces in American History This system produced a hierarchy of land owners, each of whom had a claim on the land, but took the returns from their ownership in the form of service: King Earl Knight Villein Remember, property rights are rarely simple and absolute, in this example four people own the same piece of land. Economic Forces in American History Free and Common Socage Free and common socage was an English land tenure with many characteristics. The two central ones were Fixed and certain incidents Alienability (substitutability) Economic Forces in American History During the Revolution When the colonies revolted, a major question was who owned the land? The existing colonies substituted themselves for the King, the states became the allodial owner (donor) of all the land within their borders. But what was going to happen to all of the western land? Particularly the land that had been granted to colonies in the original charters, when the grants were overlapping? Economic Forces in American History The questions were hard to answer, since the western land question implicitly included questions about the shape of the new national government, but that government didnt yet exist. The Articles of Confederation were written in 1777, but Maryland was so concerned about the western land question that it refused to ratify the Articles until Maryland waited until all the colonies (New York and Virginia were the most important) had agreed in principle to cede their western land claims to the national government. Economic Forces in American History The resulting comprises produced a patchwork of claims to western land. Virginia retained claims to military land in Ohio, which was set aside for Virginia officers who had been paid during the revolution with land warrants. Connecticut retained land claims in Ohio and western Pennsylvania, the western reserve. Massachusetts claimed land sales revenue from land in western New York. Economic Forces in American History Land Ordinances The Congress passed two land ordinances, one in 1785 and one in 1787, that established the framework for the distribution of the public lands. The Ordinance of 1785, established the method of distributing the land. 1) rectangular survey 2) auction at minimum price Economic Forces in American History Survey and Auction All of the public land was to be surveyed, and then auctioned off. Initially, every other township would be sold whole, that is all 36 square miles would be auction in one piece. The other township would be auctioned off in sections, 1 square mile, or 640 acres, at a minimum price of $2 an acre. As we will see, this didnt work out quite like the founders planned. Economic Forces in American History The Land Ordinances of 1785 and 1787 The basic principles for the settlement of western lands were laid down in two ordinances. The Ordinance of 1785 established the method by which land would be surveyed and then transferred to private individuals through auctions. The Ordinance of 1787 (often called the Northwest Ordinance as it established the Northwest Territory), laid down the process by which territories would be governed and states would be admitted to the Union. Economic Forces in American History States become the allodial owner of all land within their borders once it was sold to a private individual, but land that was never sold remained federal land. All private land in the United States held by individuals, therefore, is held at the pleasure of the state in which it is located. No Americans hold allodial rights to their land, although in practice we have the right to use our land in ways consistent with the laws of the state as long as we pay our fixed and certain incidents. Economic Forces in American History Territorial Gains Louisiana Purchase (1803) nearly doubled national territory. Florida (1819) Texas joined the U.S. in 1845 Oregon Settlement (1846) with GB Mexican Cession (1848) added CA, NV, UT and parts of CO, NM and WY Gadsen Purchase (1853) Alaska (1867) purchased from Russia Hawaii (1898) and Puerto Rico (1899) Economic Forces in American History Land Ordinance Timeline 1787 1/3 cash but balance in three months 1796 reservation price raised to $2 per acre in 30 days and balance in a year acreage requirement dropped to 320 acres in 30 days and balance in 3 years 1804 acreage requirement dropped to 160 acres 1820 reservation price dropped to $1.25; acreage requirement dropped to 80; and credit repealed acreage requirement dropped to 40 acres Economic Forces in American History Timeline cont General Pre-Emption Act put a ceiling on maximum acreage to 160 acres and sales in cash 1854 Graduation Act lowered prices of land that had been auctioned but not sold e.g.12.5 cents/acre for land unsold for 30 years 1862 Homestead Act free (maximum 160) 5 year residency and improvement requirement 1877 Desert Land Act 640 acres at $1.25/acre provided the settler irrigated 1/3 of it fraud? 1891 General Revision Act ended cash sales 1909 Enlarged Homestead Act 320 acres, 5 year residency and improvement requirement 1916 Stock Raising Homestead Act 640 acres Economic Forces in American History Public Land Sales Although the national government had hoped that land sales would be a steady source of revenue, actual land sales tended to be episodic. There would be land booms in which lots of land was sold, and then drop back to a low level. Economic Forces in American History The following map shows the change in improved acres of farm land in the 1850s alone. Economic Forces in American History The following slides show wheat production in the north, and cotton production in the south. The key to both sides is the enormous and rapid western expansion in the early 19 th century, in both regions. Economic Forces in American History Regional Integration The internal market in the United States became much more closely integrated. This was largely the result of investments in transportation and finance initially made by the states. We will talk about those this afternoon. Economic Forces in American History References: If you are interested in learning more about some of these topics: English Land Law: Brian Simpson, The Land Law, Land Tenure in the Colonies: Jonathan Hughes, Social Control in the Colonial Economy.