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Britain after the Napoleonic wars saw the rise of colonial reformers, such as Edward Gibbon Wakefield, who had extensive influence on British colonial policy. A version of Wakefield's systematic colonization plan became the basis for legislation establishing the South Australia colony in 1834 and the New Zealand colony in 1840. We use extended versions of Robert Lucas's 1990 model of coordinated colonial investment to show how Wakefield's institutions were designed to work. We also find that the analysis of Wakefield's system by Karl Marx in Das Kapital follows the same line of reasoning as Lucas's analysis of colonial institutions.

Great Britain established the new colony of South Australia (SA) in 1834, and migration from Britain to the colony began in 1836. After seven turbulent years, the discovery of two large deposits of copper at Kapunda (1843–4) and Burra (1844–5) renewed the colony’s economic prospects. Over the 1845–50 period, SA supplied roughly 9 per cent of the world’s copper production. Immigration to SA from Britain soared, with the colony’s population more than tripling between 1844 and 1851. We use the Beine–Coulombe–Vermeulen model of an economy with a booming resource sector to frame our empirical investigation of the boom’s effects on the export of other traded goods and worker living standards. Using newly developed SA wage and price series for this period, we find that immigration mitigated and offset some Dutch disease effects: there were just modest increases in SA living standards, increases in the export of wool and wheat, and a larger share in production for non‐traded goods. Finally, we conclude that the decision by Governor Grey to force broad ownership of the ‘monster’ Burra mine and the use of revenues from land sales to subsidise immigration helped SA avoid the corruption and rent‐seeking associated with other resource booms.

Great Britain established the colony of South Australia (SA) in 1834, requiring that revenues from colonial land sales be used to subsidize passage for emigrants to SA. Their immigration contract r...

During the twentieth century Japan and the United States attempted land reform in Micronesia. Japan was more successful because a growing population had led to an increasing demand for agricultural products, which could only be met by expanding agriculture across its empire. This required investment in land reform to transfer ownership from common to private rights. Conversely, the Americans faced no such domestic pressures, valuing Micronesia only for its strategic location and military testing. We formulate a model to examine the outcomes of Micronesian land reform under the long-sighted policy of the Japanese compared with short-sighted approach of the Americans.

This paper explores relationships in price and volumes across two trading zones of the water allocation market in the Goulburn-Murray Irrigation District in Northern Victoria. Previous papers have explored the reasons for price variations across trading zones within this region, our focus is to add to this literature by analysing how information is incorporated into market prices across different zones that can contribute to the presence of price leadership. Market prices reflect the incorporation of new information and evidence from financial markets suggests that this process leads to a pervasive lead–lag relationship across alternative markets offering similar products. As a result, markets with leading prices are thought to incorporate new information first. We examine if this lead–lag relationship exists in the far less liquid water market. Our analysis shows that the most actively traded of the two trading zones (the Greater Goulburn trading zone) plays a key role in price leadership. We postulate that the nature of production in the different zones contributes to this lead–lag relationship in prices because crops tend to be zone specific and each crop has different water requirements both within and between seasons. This drives the most active trading zone to play a greater role in the price discovery process.

This paper will analyse the operation of the British common law of riparian rights in the Riverina District of New South Wales (NSW), Australia between 1850 and 1870.* Theorists argue that the predisposition of people to fight over or cooperate to exploit valuable resources depends on how well property rights are defined and enforced.†The operation of the riparian doctrine in the Riverina provides an empirical, historical example of why inefficient property rights promote violence. Violence in this instance was based on collective action directed at the destruction of water supply infrastructure, specifically dams, constructed on various rivers within the Riverina. This paper considers why collective action in violence did not spill over into infrastructure construction. It is argued that the failure of collective action was due to its high costs stemming from several factors: failure to meet optimal group size; problems of free riders; hold-up concerns; and the introduction of a much disputed land policy in 1861 referred to as selection.

The finding of clustering in financial prices on particular digits is common across a broad range of financial markets. This article explores whether price clustering is also present in the case of the weekly market for seasonal water in rural Victoria, Australia. We find a similar degree of clustering in the seasonal water market. This suggests that the trading activities of the market produce characteristics that are similar to more sophisticated and deeper financial markets.

How do property rights evolve when unoccupied areas attract economic use? Who are the first claimants on the frontier and how do they establish their property rights? When do governments providede jureproperty rights? We present a conceptual framework that addresses these questions and apply it to the frontiers of Australia, the United States, and Brazil. Our framework stresses the crucial role of politics as frontiers develop by identifying situations where the competition for land by those withde factorights and those withde jurerights leads to violence or potential conflicts.

Water governance in Australia’s irrigation sector has undergone substantial change over the last three decades. In part, this change has been the result of a shift in intellectual thinking regarding the pricing and allocation of irrigation water with a move away from primary reliance on government to undertake these activities and a greater dependence on markets. Institutional change will be impacted on by the existence of institutional path dependence created by previous frameworks. Path dependence arises because actors are unable to predict the exact outcome of decisions made at different junctures in time. Individual decisions may be temporally remote but will impact the subsequent path of change as a result of lock-in. In turn, institutional path dependence may create some rigidity within new institutional arrangements. Evidence of current trading restrictions on Victorian water markets illustrates this outcome. These restrictions may not be permanent, but in the short-run they have limited, to some extent, the gains accruing from water trading.

In the context of highly liquid markets and intra-day data, Engle and Lange (2001) successfully develop a measure of market depth they call VNET. This article explores the applicability of a modified version of this measure in the case of the weekly market for seasonal water in rural Victoria. The modified VNET measure is found to be successful in this much more illiquid market, and interestingly our results on determinants are qualitatively similar to those obtained in Engle and Lange (2001).

Institutional change in water rights in the nineteenth century Australian colony of Victoria raised institutional efficiency, which contributed to long-run economic growth. High-quality human capital and the extension of voting rights (franchise) were crucial for efficient institutional change in the water sector. Quality human capital (literacy) appeared to increase the rural population's awareness of the economic impact of the existing structure of water rights that may have constrained growth in the agricultural sector and reduced investment incentives. Extension of the franchise allowed the rural population to exert political pressure for enactment of change in water rights, which resulted in efficiency-enhancing policies and efficient institutions. The findings show these two factors were more important than Victoria's British colonial heritage in determining whether growth-enhancing institutional change took place.

Scholars argue that violence will not occur in the presence of efficient property rights institutions. Empirical evidence from the Riverina district in New South Wales between 1855 and 1870 contradicts this claim. This paper provides a preliminary analysis of evidence to explain this apparent inconsistency. Violence was directed at upstream users who dammed rivers, preventing flow to downstream users. Evidence suggests violence was a form of social control referred to as self-help employed to enforce conventions of fairness. Dams were perceived as unfair because they reduced the distributive equity embodied in the common law of riparian rights that established water-use rules to allocate water between competing users. Violence in the form of dam destruction occurred primarily during drought years and was the preferred over common law remedies because of the lag time between seeking court intervention and obtaining a remedy. Coasean bargaining was not possible because of high transaction costs. The findings suggest that violence may occur in the presence of efficient property rights institutions if actors violate conventions of fairness. Violence may be more likely if property rights themselves embody these conventions.

We analyse supply, demand, and welfare measures in markets where the temporary trading of water rights is reasonably active and liquid on a weekly basis. We identify four important characteristics of water trading within the Watermove program: (1) demand is highly responsive to price changes, supporting evidence that farmers’ participation is driven by the advantages water markets provide in reducing seasonal risk; (2) some efficiency enhancing trades are prevented from taking place due to physical limitations of the delivery system, thereby reducing the ability of the market to move toward equilibrium. In addition, these limitations also created price premiums in some zones; (3) variations in the types of products traded are explained by differences in the administrative charges for trading and current drought conditions; and (4) relatively large gains have been made thus far, suggesting that water markets will expand and generate additional increases in consumer and producer surplus in the future.

This paper provides a preliminary exploration of the role of adaptive efficiency and institutional learning as the basis for long-run economic growth in Australia by means of an analysis of the institutional changes in water rights between 1850 and 1886 in the colony of Victoria. It is argued that the effects of adaptive efficiency and institutional learning led to the replacement of growth- hindering institutional arrangements in water supply in favour of growth-enhancing frameworks that provided the basis for better economic performance over the long-run. The analysis presents evidence that suggests that in addition to the colonial experience, adaptive efficiency embedded in the inheritance of British culture rather than institutions has played an important role in Australia's economic performance.

This paper investigates the interconnection of changes in the institutional framework to promote water development and subsequent alterations to natural landscapes that have occurred over much of Victoria's history. Specifically, a clear correlation is demonstrated between institutional and natural landscape changes, and environmental degradation. Throughout Victoria's history, each phase of water development ushered in by changes to the institutional arrangements signalled more significant changes to natural landscapes, highlighted by the acceleration of infrastructure construction to harness water supplies and more intensive use of water. As water-supply development became more intense, the natural landscape changes that accompanied this development led to the alteration of delicate ecological systems that had evolved over thousands of years, leading to an acceleration of environmental degradation. The link between changes in institutional structures for water development and the impacts of thi...

Water markets have been used by Australian irrigators as a way to reduce risk and uncertainty in times of low water allocations and rainfall. However, little is known about how irrigators' bidding trading behavior in water markets compares to other markets, nor is it known what role uncertainty and a lack of water in a variable and changing climate plays in influencing behavior. This paper studies irrigator behavior in Victorian water markets over a decade (a time period that included a severe drought). In particular, it studies the evidence for price clustering (when water bids/offers end mostly around particular numbers), a common phenomenon present in other established markets. We found that clustering in bid/offer prices in Victorian water allocation markets was influenced by uncertainty and strategic behavior. Water traders evaluate the costs and benefits of clustering and act according to their risk aversion levels. Water market buyer clustering behavior was mostly explained by increased market uncertainty (in particular, hotter and drier conditions), while seller-clustering behavior is mostly explained by strategic behavioral factors which evaluate the costs and benefits of clustering. Refereed/Peer-reviewed

In the Australian context greater policy reliance has been placed on the role that market based solutions can play in solving problems in the allocation of irrigation water. In Northern Victoria one of the most active areas of water trading is in the Goulburn-Murray Irrigation District. To facilitate water trading in this area an electronic market clearing mechanism exists through the Watermove arrangements. Under the Watermove arrangements the state is divided into regions and trading zones, however most of the trading zones have very little trading activity. This paper explores relationships in price and volumes across the two most active trading zones in the Goulburn-Murray Irrigation District in Northern Victoria. While previous papers have explored spatial dimensions of pricing across trading zones our focus is on relationships driven by price and volume characteristics. An analysis of price and volume relationships across trading zones enables an understanding of whether trading volume in a zone produces more informed prices and enables that zone to take on a price leadership role. Our analysis considers the stationarity properties of the price and volume data across the two trading zones and then estimates VAR models of the price and volume relationships across these trading zones. From the VAR models we are able to conduct both Granger causality tests and variance decomposition analysis. This analysis shows that the most actively traded of the two trading zones (the Greater Goulburn trading zone) plays the key role in price leadership. This finding is broadly consistent with previous research on highly liquid financial markets and suggests that irrigation water markets are developing characteristics similar to more liquid financial markets, giving confidence in their successful operations.

Empirical studies have established that franchise extension has positive effects on long-run growth because democratisation leads to greater equality of access to resources. However, in the short-run franchise may lead to a redistribution of resources away from important sectors of an economy. This paper examines this proposition by considering the case of land reform in the colony of New South Wales between 1862 and 1882. Reform was a direct result of franchise extension in preceding years that attempted to reallocate land away from the wool sector to small agriculturalists. Wool producers tried to avoid redistribution of their holdings by expending resources on evading reform legislation. These were resources that could have been invested in productive activities and therefore, it is expected that franchise reduced short-run growth because of the institutional changes it induced. The results presented here confirm that evasion efforts acted to reduce both pastoral sector and total GDP in the short-run.

This paper formulates a demand model for residential water in Sri Lanka using the Stone-Geary functional form. This functional form considers water consumption to be composed of two parts—a fixed and a residual component. The presence of these two components means it is possible to estimate a threshold below which water consumption is non-responsive to price changes. In turn, this can provide policy makers with a better understanding of the degree to which price changes will affect water consumption and the extent to which price instruments can be utilised to raise additional revenues. These revenues could then be used to extend pipe-borne water infrastructure to a greater proportion of the population than is currently the case. The findings presented here show the portion of water use that is insensitive to price changes in Sri Lanka is between 0.64 and 1.06 m3 per capita per month. The results indicate that price elasticity ranges from -0.11 to -0.14 while income elasticity varies from 0.11 to 0.14. Combined, these findings suggest water authorities could raise revenue via price increases to fund critical infrastructure extension.

This paper presents a general model of the interaction between settlement and the emergence of de facto property rights on frontiers prior to governments establishing and enforcing de jure property rights. Settlers have an incentive to establish de facto property rights to avoid the dissipation associated with open access conditions. The potential rent associated with more exclusivity drives the ‘demand’ for commons arrangements. As the potential rental stream from land increases due to enhanced scarcity there is a greater demand for more exclusivity beyond what can be sustained with commons arrangements. In some instances claimants will petition the government for de jure property rights to their claims – formal titles. In other instances it may be cheaper to acquire titles through fraudulent means. To the extent that governments supply property rights to those with first possession, land conflict will generally be minimal, though there may be political protests. But, governments face differing political constituencies and may not allocate de jure rights to the current claimants. Moreover, governments may assign de jure rights but not be willing to enforce the rights. This may generate potential or actual conflict over land depending on the violence potentials held by the de facto and de jure land claimants. The authors examine land settlement and land conflict on the frontiers of Australia, the U.S. and Brazil. They are particularly interested in examining the emergence, sustainability, and collapse of commons arrangements in specific historical contexts. Their analysis indicates that the emergence of demand driven de facto property rights arrangements was relatively peaceful in Australia and the U.S. where claimants had reasons to organize collectively. The settlement process in Brazil was more prone to conflict because agriculture required fewer collective activities and as a result claimants resorted to periodic violent self-enforcement. In all three cases the movement from de facto to de jure property rights led to potential or actual conflict because of insufficient government enforcement.

We present a general model of the interaction between settlement and the emergence of de facto property rights on frontiers prior to governments establishing and enforcing de jure property rights. Settlers have an incentive to establish de facto property rights to avoid the dissipation associated with open access conditions. The potential rent associated with more exclusivity drives the “demand’ for commons arrangements. As the potential rental stream from land increases due to enhanced scarcity there is a greater demand for more exclusivity beyond what can be sustained with commons arrangements. In some instances claimants will petition the government for de jure property rights to their claims – formal titles. In other instances it may be cheaper to acquire titles through fraudulent means. To the extent that governments supply property rights to those with first possession, land conflict will generally be minimal, though there may be political protests. But, governments face differing political constituencies and may not allocate de jure rights to the current claimants. Moreover, governments may assign de jure rights but not be willing to enforce the rights. This may generate potential or actual conflict over land depending on the violence potentials held by the de facto and de jure land claimants. We examine land settlement and land conflict on the frontiers of Australia, the U.S. and Brazil. We are particularly interested in examining the emergence, sustainability, and collapse of commons arrangements in specific historical contexts. Our analysis indicates that the emergence of demand driven de facto property rights arrangements was relatively peaceful in Australia and the U.S. where claimants had reasons to organize collectively. The settlement process in Brazil was more prone to conflict because agriculture required fewer collective activities and as a result claimants resorted to periodic violent self-enforcement. In all three cases the movement from de facto to de jure property rights led to potential or actual conflict because of insufficient government enforcement. property rights, Australia, Brazil, United States

This paper analyses whether the evolution of water law in the Australian colony of New South Wales (NSW) contradicts theoretical models that suggest in arid countries correlative, land based water rights will be replaced with individual ownership. Evidence from NSW shows a series of Supreme Court decisions between 1850-1870 adopted correlative riparian rights thereby implying that common law was inefficient. However, further consideration of factors that gave rise to these decisions suggests the value of water was higher when used in unity because of the arid climate and non-consumptive nature of water use in the pastoral industry. The findings suggest that where intensity of water use is low, economic development is dominated by industries requiring low levels of capital investment, and acute water scarcity prevails, correlative water rights are efficient.

This paper analyses the transition of water rights institutions in Victoria, Australia, between 1840 and 1886. It will focus on the shift from the common law doctrine of riparian rights to government control of water supplies via quasi-government organisations known as irrigation trusts examining factors leading to this transition and whether it increased institutional efficiency. Evidence suggests transition to government control resulted from two factors. First, the decreasing costs of using government relative to costs of private redefinition because settlement numbers increased thereby increasing scarcity while adding to costs of private investment in redefinition due to higher negotiation and enforcement costs, legal uncertainty, and the inability for private actors to capture the full benefit of a transition. In this way, transition was efficient as it lowered transaction costs associated with creating irrigation schemes to provide water supply security. Second, crisis of drought that increased in magnitude over the period due to changes in dominant farming methods from land extensive grazing to land intensive crop farming. Drought escalated demands, via lobbying, for government action. Combined, these two factors explain why an efficiency enhancing transition from riparian rights to government control took place at this juncture in Victoria's history.

This paper conducts an analysis of the water markets in Victoria covered by Watermove. The analysis in this paper examines the weekly trading activity across trading zones. For the majority of trading zones there is little trading activity that occurs. There are three trading zones in which the markets for temporary water rights are reasonably active and liquid on a weekly basis, and for these zones an analysis is conducted of their demand and supply elasticities and consumer and producer surplus. The results of this analysis suggest a stronger relationship on the supply side between prices, volumes, elasticity and producer surplus.

This paper analyses the role of government failure in Victoria's water sector between 1905 and 1984 as evidenced in the rise of in-stream salinity. It will be shown that high levels of salinity can, in part, be attributed to regulatory failure for two reasons. First, the method of water allocation, a compulsory minimum charge with the marginal cost of water being zero, encouraged over watering, resulting in increased water tables via groundwater recharge. Second, the government did not provide adequate finance for construction of appropriate removal of saline drainage water, and thereby allowed increasing in-stream salinity.

Leading scholars in the field of law and economics contribute their original theoretical and empirical research to this major Handbook. Each chapter analyzes the basic architecture and important features of the institutions of property law from an economic point of view, while also providing an introduction to the issues and literature.