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Libecap: Economic variables and the development of the law

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Libecap. 1996. Economic variables and the development of the law: The case of Western mining rights. In Empirical Studies of Institutional Change, eds. Alston, Eggertsson, and North. Cambridge: Cambridge University Press, pp. 34-58.

Major mineral strikes in Nevada had two effects: they brought massive immigration, and they raised the value of the land. Libecap's major hypothesis: Expect to see refinement of property rights law (Y) after a major ore strike because this raises the expected benefits of ownership (X1) and raises the uncertainty of ownership (X2) as new competition for a piece of land heats up.

Really? Gee, duh. I don't get whats so phenomenal about this argument. Nevada experienced a huge shock that changed it from having roughly 100 people around Virginia City to having several thousand. Is it really any surprise that legislative and judicial insitutions needed to be developed as a result, and that miners wanted the government to secure the claims from trespassers?

Besides not offering any particular theoretical enlightmenment, Libecap does something I hate: he uses an index of "development of property rights law," which is based on adding up linearly a bunch of things that probably shouldn't be added linearly, like court rulings, duties of the sheriff, and so on (see page 44).

Grade: C.