1. Introduction
In 1928, the Institute for Government Research, known later as the Brookings Institution, published The Problem of Indian Administration. Known as the Meriam Report (after its author, Lewis Meriam), its purpose was to evaluate the economic well-being of American Indians living on reservations under the rules established by the General Allotment Act (also known as the Dawes Act) of 1887.Footnote 1 The report found that most reservation Indians were extremely poor despite the Act's stated goal of improving economic conditions on reservations (Meriam, Reference Meriam1928). Seven decades after the report was issued, reservation Indians were the poorest group in the country (Miller, Reference Miller2001).
Economists point to persistent differences in property institutions on and off reservations as an explanation for this situation. From 1776 onward, the American government allowed settlers to secure private property rights in fee simple, which grant the owner of the land the most power to decide how the property is to be used. Since trade is the exchange of property rights, the gains from exchange (and hence wealth) increase as private property is more clearly defined and enforced. Federal policy continued to allow settlers on the frontier to readily acquire fee simple property title to land on and off throughout the nation's first century and a half of development. Even though settlers' rights to property were often imperfectly defined or incomplete (e.g. settlers did not have mineral rights in many instances, and the process of allocation was itself subject to considerable defects during the 19th century), the institutions broadly favored settlers and more directly to our analysis of long-run development here, wealth creation. Federal policy, by allowing settlers to acquire fee simple, reduced settlers' transaction costs of establishing property rights and hence increased their ability to delineate wealth in a way which compounded considerably over the years in which the United States developed since its inception.
Throughout we rely on the more general term ‘property institutions’ to broadly describe institutional arrangements governing property. More specifically, we take institutions to mean the rules articulated by known organizations with enforcement capacity (Alston et al., Reference Alston, Alston, Mueller and Nonnenmacher2018), although we predominantly limit our analysis to the property institutions available to settlers and Indians through public enforcement mechanisms. A system dealing with the allocation of resources in a community for use, exclusion, or transfer is what we deem ‘property institutions’. In many observed instances, property institutions at most delineate use rights for temporary periods to individuals, while retaining other components of the ‘bundle of sticks’ metaphor for property rights at different levels of authority, or removing them from application to the resources in question altogether. Rather than debate whether all such property institutions can rightly be deemed ‘property rights’, we limit our vernacular to rights in the instances of settlers, and institutions in the more general and Indian cases. Our argument surrounds how settlers ultimately received definitively allocated and clearly specified individual property rights that were actionable by the right holder before the courts, and how Indian ‘rights’ never approached the consistent actionability that settler rights did, even in those cases where a reservation happened to have fee simple allocation due to their specific experience at the hands of the federal government. Ultimately, because Indian property institutions were subject to shifting and frequently expropriative treatment, we argue they never reached a sufficient level to systematically give economic actors the ownership certainty that traditional conceptions of property rights of necessity entail.
If the institutional option was even present, Indians had much more of a burden than settlers in securing land in fee simple (including a much longer wait of 25 years under the Dawes Act to secure property rights in fee simple) and their ability to choose property rights that fit with their local conditions was significantly diminished on reservations. Today, property institutions on reservations remain subject to constraints that individuals off reservations do not face. This feature of tribal-state relations appears to contradict the federal government's more recent commitment to tribal sovereignty. Although American Indians treatment in the 19th and 20th centuries was one of dispossession and inconsistency, the federal government over the past four decades has moved away from many of the nominally paternalistic policies that governed tribal-state relations. According to President Obama's Secretary of Indian Affairs, tribal governments currently have ‘more authority and relative economic power than any time since the earliest days of that relationship’ (Washburn, Reference Washburn2016: 202).Footnote 2
Such optimism must be at least partially qualified by consideration of the fact that continued federal restrictions on definition and enforcement of property institutions reduces tribal wealth. A recent analysis of differences between privately held (fee simple), tribally held, and trust land (property technically owned by the government) found that government control was observably worse for economic development than tribal or fee simple control of property, with private property slightly outperforming tribal control (Dippel et al., Reference Dippel, Frye and Leonard2020). But given that outcomes on reservations that received the greatest share of privatized lands are still considerably poorer than regional or national averages, this directly indicates that specific differences in property institutions are at most part of the answer to why reservations remain chronically underdeveloped. Given this, we argue that certainty in institutions may dominate the specific institutional form chosen, or at a minimum, matters more than the specific institutional form chosen in the historical contexts we explore here.
Moreover, privatization is not guaranteed to be better than Indian solutions or even to be the first-best solution to economic development issues in Indian country; the presumption that it is ignores the historical and cultural aspects that can make privatization problematic on reservations (Miller, Reference Miller2018). We therefore look to recent institutional scholarship that emphasizes the importance of the ongoing process by which property rights are allocated and enforced (Arruñada, Reference Arruñada2012), as well as the persistent consequences that can result from variance (Allen and Leonard, Reference Allen and Leonard2020) or defects (Alston and Smith, Reference Alston and Smith2020) in this process. According to these perspectives, an individual's economic behavior depends not only on the static form of property rights available to them for economic use, but also the larger political economic context that determines the ongoing stability of that institutional structure. The latter is significant as economic actors are less willing to make investments when they are less certain they can secure future returns to an investment.Footnote 3 The economic value of a property right is thus static and dynamic with respect to the government specifying and enforcing it. In contexts where ongoing treatment is sufficiently poor, this chronic uncertainty can itself stunt economic development.
The comparative treatment of American Indians provides a clear example of this socially detrimental phenomenon. Economic development is more likely when local property institutions are allowed to evolve in response to evolving conditions that might bear on the contracting parties (Anderson and Hill, Reference Anderson and Hill1975). Accordingly, we want to explain how systematic variance in political and legal institutions shapes the allocation and development of property. The institutional outcomes governing property that we describe here for settlers and American Indians can be understood as resultant from a national political economy that varied significantly with respect to each group. When desirable institutional features are sufficiently lacking for a given group over a succession of political administrations, the efficient evolution of property institutions is stunted. Individuals within that group will be deterred from engaging in beneficial uses of property, thereby reducing economic well-being. Today, as in the past, a key obstacle to economic development in Indian country is the lack of political and legal autonomy and government capacity that enables tribes to define and enforce property institutions in response to evolving local conditions, which of necessity requires some measure of dynamic certainty in these institutions.Footnote 4
Importantly, though, chronic uncertainty over property institutions has by no means eliminated the economic activity of American Indians. Like all groups, Indians had durable and functional property institutions prior to the arrival of colonists that enabled them to generate wealth. More recently, there are numerous success stories of American Indian economic development, from the individual entrepreneurial to the reservation level (Miller et al., Reference Miller, Jorgensen and Stewart2019). But the fact of relative underdevelopment remains. It is to this relative margin that our analysis seeks to add additional explanatory value. Our analysis provides a theoretical framework to understand how despite observable entrepreneurial economic activity on the part of American Indians across their time on the continent, levels of development remain persistently lower than comparable areas that were developed by settlers. As we argue, the chronic problem affecting the coordinative function of institutional commitment mechanisms on reservations results from a national political economy that varied significantly with respect to each group, both historically and in the current context of trusteeship.
2. The political economy of state predation and the evolution of property institutions
Although new institutional economics recognizes that property institutions can be incompletely defined due to the transaction costs that are present wherever property rights are defined and enforced, much of the property institutions literature conceptualizes the public provision of property institutions as a public good due to the way in which reliable impartial third party enforcement reduces transaction costs. Once the government establishes property rights, the rule of law prevails to allow market prices to govern exchange. A long tradition from Thomas Hobbes through modern public choice theorists views a contractual state as necessary for the rule of law, including property rights (Buchanan, Reference Buchanan1975). In contrast, a predatory theory of the state does not believe the government is primarily interested in providing public goods (Vahabi, Reference Vahabi2016). Predation is, in effect, a unitary concept with respect to the predator and prey. A group potentially under threat of predation by a more powerful actor should primarily be concerned with whether the incentives are to predate in a given period. Problematically, though, this unitary concept conceals the more complex political economic forces that might lead to an equilibrium incentive to predate on the part of the state, which is effectively a coalition of powerful social units engaged in a public arena of distributional conflict (Vahabi, Reference Vahabi2004).
This type of an equilibrium in which government treats groups differently is a central feature of theories of selective enforcement of property institutions in which economic growth may result even when property rights are not provided uniformly as a public good (Cai et al., Reference Cai, Murtazashvili and Murtazashvili2020; Haber et al., Reference Haber, Razo and Maurer2003). Establishing property rights for settlers and a secondary institutional system for American Indians is the example we use to motivate our analysis throughout. The US government viewed tribes as rival states and in opposition to US interests in opening up the frontier for settlers. Our argument recognizes that American Indian interests were perceived as incompatible with the interests of the state, either because these interests came in opposition to those of more well-represented groups, or because these interests did not reach the level of representation necessary for consideration at the national political level. For less well-represented groups in society, the outputs of the dominant public sector actor are not ones they can systematically influence, but are nonetheless ones that members of these groups must take into account when deciding whether and the extent to which they should engage in costly economic activity. Our position relies on the recognition that the distributional conflict that can result in predatory outcomes may never provide certain groups representation, which can itself influence property institutions, in addition to the specific institutional form taken at a given period of time.
The property institutions literature has broadly identified the systemic characteristics that give economic actors sufficient certainty to engage in costly development.Footnote 5 One important characteristic is sufficient military capacity to secure property against outsiders (Batchelder and Freudenberger, Reference Batchelder and Freudenberger1983; Geloso and Salter, Reference Geloso and Salter2020); administrative and enforcement capacity to define and enforce property institutions for those who want them (Arruñada and Garoupa, Reference Arruñada and Garoupa2005); and political constraints to ensure the government's promises to respect property institutions are credible (Boettke and Candela, Reference Boettke and Candela2020; Candela, Reference Candela2020). Furthermore, the development of property institutions requires that political decision-makers are residual claimants with at least some incentive to protect property (Leeson and Harris, Reference Leeson and Harris2018; McChesney, Reference McChesney1990). Finally, although military capacity is one way to establish sovereignty, giving land away to encourage settlement is a complementary way to establish territorial control (Allen, Reference Allen1991a, Reference Allen2019).
Property institutions evolve in response to the changing benefits and costs that confront decision-makers, whether they are governments or individuals (Barzel, Reference Barzel2002; Demsetz, Reference Demsetz1967; Leeson, Reference Leeson2020). Since transaction costs are the costs of establishing and maintaining property rights, understanding the sources of transaction costs are critical to understanding the institutional evolution of property in a given context (Allen, Reference Allen1991b, Reference Allen2015). What the above discussion illustrates is that these costs are determined in part by the presence of a specific type of political-institutional context: military capacity to defend borders and protect the property and wealth of individuals, administrative and enforcement capacity, constraints on political control of property institutions, and courts that enable property holders to defend their rights. Each of these outcomes is a dynamic function for economic actors, though; not only must a given property user consider the extant property institutions in place at the time of investment, but they must also consider the ongoing stability of these institutions in order to be secure in the future benefits of their costly investment today (Anderson and Parker, Reference Anderson and Parker2008).
Within any given political economic equilibrium in a particular jurisdiction, the government may enforce property institutions selectively. For groups represented within the dominant political economic equilibrium (such as those recognized as citizens with associated rights), their property protection depends on the government's capacity to define and enforce property rights, along with political constraints and opportunities to participate in the political and legal regime to defend property rights. In contrast, subversion of certain groups' property institutions within the regime both remains a function of government capacity (as subversion is also costly), as well as the extent to which the unrepresented groups' interests cut against those of the extant political economic equilibria. The effects of subverting property institutions are themselves likely to be harmful to economic incentives, although the dominant regime is expected to balance these costs (including costs of subversion) against the interests of coalitions within the majority in an inequitable regime (such as by settlers' desire for additional land). This chronic effect on property institutions operates through disparities within the dominant political economic equilibrium that reflect the structure of access to political and legal institutions, which in the case of American Indians was comparatively lacking throughout the period we survey.
Our analysis traces the political origins of chronic uncertainty in Indian country, contrasting it with the relative certainty afforded to settlers. We attribute the greater certainty associated with the legal rights settlers acquired to property to political and legal institutions that provided settlers the confidence that they could defend their property rights in court or agitate for changes to improve the match of policy to local conditions through state representation in the federal government. This certainty in turn encouraged individual investment in settlement and costly self-enforcement, neither of which would make economic sense dynamically if a given settler expected a sufficient probability of expropriation or limitations on their use of the property in the future by powerful private or public actors in the future.
Although Indians had durable and functional property institutions and therefore opportunities to trade with Europeans, the position of American Indians with respect to the dominant political economic equilibria was most typically one of either direct conflict or neglect. To be sure, there are many tribes and certain policies that were more favorable to tribes than others (Edwards et al., Reference Edwards, Friefeld and Wingo2017). Despite such variance in federal policy, it remains the case that federal treatment of American Indian property institutions typically had one or both of two effects: creating immediate defects in property institutions (that nonetheless had persistent consequences, as the recent literature shows) and eroding long-term faith in the reliability of treatment in future periods (the chronic uncertainty of property rights, such as subjecting Indians' property institutions to shifting political economic equilibria and slowly eroding tribal sovereignty over property over extended periods). The nation's ongoing development from its inception displays this pattern, which we argue explains the systematic underdevelopment of American Indian reservations. Thus, although the current system of trusteeship (federal control of land) has certain benefits that offset some of its numerous costs (Miller, Reference Miller2012), the complex, slow moving, and unresponsive federal rules continue to impede economic development on Indian reservations within a historical context of institutional treatment that would make any economic actor think twice about incurring a costly investment on reservation as compared to elsewhere.
Recent economics scholarship has identified the persistent consequences of institutional choices (Bleakley and Lin, Reference Bleakley and Lin2012), including on American Indian reservations (Dippel et al., Reference Dippel, Frye and Leonard2020). Beyond the path dependent consequences of institutional choices during specific formative periods, the long-run scalar benefits of impersonal institutions can only be realized through their provenance of intertemporal certainty (Broadberry and Wallis, Reference Broadberry and Wallis2017). A decision to coordinate with another party to a costly investment today is necessarily a function of the ongoing stability in the set of institutions defining the investment today. For economic development on reservations, this has concrete implications for the tendency of investors external to the reservation to be willing to commit costly capital, as well as the willingness of economic actors on reservation to coordinate with one another. A discrete period of institutional uncertainty on the US frontier has displayed negative consequences for coordinated natural resource investment that persisted well over a century afterward (Alston and Smith, Reference Alston and Smith2020), which also means institutional outcomes were not uniformly optimal for settlers along the frontier. Nonetheless, at the aggregate level of historical analysis that we treat here, settlers' expectation as to their ability to reap the rewards of costly investment strictly dominated those of American Indians, for reasons we proceed to detail. Therefore, a historical accounting of the institutional causes of stymied development on reservations must consider the costs of chronic uncertainty in addition to the specific institutional defects that prevailed at any given time.
3. The evolution of property rights for settlers
By 1853, the United States acquired 1.2 billion acres of land through war and treaties, securing the land that would pave the way for the economic development of the country. From its inception, the US government encouraged settlement of the frontier. The Land Ordinance of 1785 and Northwest Ordinance of 1787 established cash sales to allocate public land via auctions in large, rectangular sections that could be divided into smaller sections for agriculture, thus reducing the transaction costs of establishing property rights in fee simple (Libecap and Lueck, Reference Libecap and Lueck2011). Overall, government policing generally encouraged western settlement, including turning a blind eye to illegal settlement that likely had territorial/economic sovereignty benefits. The coercive power of government, which was already constrained by political institutions (the Constitution, separation of powers, and federalism), was not perceived as a direct threat to settlers, and was typically directed as supporting expansion into the frontier and protection of settlers from those they perceived as threats, namely American Indians.
Although the government viewed public land as a source of revenue, cash sales initially had low rates of use by settlers, in part because squatters ignored the law but mostly because people were not willing to pay for it. Although some people paid for land (including speculators), squatting became an issue for the American government shortly after the Revolutionary War when settlers in Pennsylvania established a ‘claim club’ – the Fair Play System – to allocate land among themselves and to serve as a mutual defense pact against American Indians in the region who were still negotiating with the government, an institution that persisted further west in the ensuing decades (Murtazashvili, Reference Murtazashvili2013). Squatters continued to occupy land as soon new territories were considered reasonably safe from Indians, which suggests they felt sufficiently secure in their use of the land as against the nominal illegality of their occupation. Within the federal/state political economic equilibrium, settlers were protected from national enforcement due to lacking capacity, and from state enforcement due to the political economic incentives associated with increased population and economic activity.
One way the clubs eventually secured opportunities for secure property rights in fee simple was through the numerous preemption laws. Although the most significant bills include preemption acts in 1830 and 1841, Congress passed dozens of preemption laws between 1810 (a preemption act recognized squatters' rights in Michigan) and 1854 (a preemption act recognizing squatters' rights in Kansas and Nebraska). Preemption laws allowed individuals who occupied land prospectively to purchase 160 acres at a price of $1.25 an acre. They could acquire the rights in fee simple if they could prove they had already occupied land before the law was passed (preemption only applied to those already on the land when it was passed), in which case they perfected their title (they also had to pay for their land, and if they took it on credit, make their payments). Although economic historians (especially Swierenga, Reference Swierenga1966 and Bogue and Bogue, Reference Bogue and Bogue1957) have shown that land speculation served important economic functions in development of the frontier, Congress frowned on speculation, preferring instead to encourage agricultural development.Footnote 6 Hence, they imposed these additional restrictions before issuing the perfected title to preemptioners in order to make speculation more costly, although the economic histories referenced above suggest speculation continued largely unabated.
Many still hoped for free land, and the Republican Party in the 1850s adopted a platform of ‘Free Soil, Free Labor, and Free Men’ (Foner, Reference Foner1971). Accordingly, it threw its support behind homesteads, a direct testament to the political influence that demands for western settlement had within the political economic equilibrium at the time. Homesteads differed from squatters' rights in that the land was free, although receiving a patent required costly land improvements over the period of 5 years on the part of the settler. Although not a formal legal requirement, homesteaders also tended to occupy land in advance of registering a claim with the local land office in order to secure their choice of land (Allen, Reference Allen1991a).
As far as encouraging settlement, federal policies governing the public lands were a success. By 1900, millions of settlers had secured property rights in fee simple, whether through preemption, the Homestead Act, cash sale, or the numerous other paths to title provided by the government. Importantly, though, this process was not without significant hiccoughs, especially in these periods when public land laws required the large-scale administration of frontier lands in the western United States. Mechanically, the terms of the various land acts required local administrative action followed by the issuance of a patent in Washington DC, an intrinsically time-consuming process. In part because of this, the administration of the General Land Office was subject to considerable criticism at the local and national levels in terms of chronic delays in land surveying, patent issuance, and a period in which railroad influence in the office was viewed as outsized if not outright corrupt (Dunham, Reference Dunham1937). Eventually, though, Supreme Court and public presidential interventions compelled the issuance of mineral and land patents respectively to frontier claimants as against the land office itself, as well as a competing railroad land grant claim (Powers, Reference Powers1889).Footnote 7 Settling on the frontier was not without its own uncertainty for settlers, but the broad presumption that was reaffirmed over the course of 19th century as the frontier moved westward was that individual settlement would eventually be recognized by the government in terms of formal title to the land. This stands in stark contrast to the treatment of American Indians' property institutions by the federal government over the same historical period.
4. The evolution of property institutions in Indian country
4.1 Initial dispossession and foreclosure of legal and administration remedies
Most tribes did not fit the stereotypical image of egalitarian, hunter-gatherers prior to European arrival (Carpenter and Riley, Reference Carpenter and Riley2019: 808). As Miller (Reference Miller2012: 20) explains, American Indians recognized the value of commerce before Europeans arrived and had enduring functional property institutions necessary to support exchange above a limited personal network level. For example, Cahokia, located near present day St. Louis, Missouri, was a flourishing city from 700 to 1300 CE with a higher population than London during the 13th century. The Cahokians constructed the largest earthwork structures ever made. Cahokia's economy consisted of agriculture, specialized labor, and long-distance trade. Indigenous North American economic hubs existed such as Chaco Canyon, The Dalles, and the Mandan Villages as well.
In the eastern part of North America, Indian tribes were relatively sedentary and more dependent on agriculture, resulting in clearly defined and enforced property institutions, such as marking corners of fields with stones bearing the names of the owning clan (Anderson and Leonard, Reference Anderson, Leonard and Anderson2016). The largest tribes in the southeast (Cherokee, Choctaw, Chickasaw, and Creek) had similar agricultural economies and integrated to such an extent with British settlers that many Indians became yeoman farmers cultivating five to seven acres or more. Cherokee property law distinguished tribal, lineage, and individual property: individuals owned and traded their land, and they regulated hunting grounds as commons (Perdue, Reference Perdue1979: 33–34).
Tribes also established property institutions governing capital assets. Plains Indians marked arrows to reward proficient hunters with choice cuts of bison meat on hunts (Benson, Reference Benson and Anderson2006). In the southwest, Pueblo Indians had advanced agriculture and animal husbandry, each requiring well-developed property institutions. Navajo property institutions held grazing lands in common but recognized individual possessions, including homes and land for farming, as private property (Austin, Reference Austin2009: 151–152). Indians who depended on salmon established property institutions to govern this highly valuable capital asset (Johnsen, Reference Johnsen1986). Some tribes even defined property institutions governing the Pacific Ocean (Miller, Reference Miller2012: 14–15). After Europeans arrived on this continent, the extensive and efficient tribal trading networks led to the spread of European goods to many tribes long before their first encounter with white people (Miller, Reference Miller2001).
All of this suggests some measure of impersonality in property institutions needed to successfully coordinate economic activity. Although Indians therefore had property institutions and understood the value of trade, the position of American Indians (and their property institutions detailed here) as against the fledgling colonial and then national authorities was one of sovereign-to-sovereign. In such interactions, sovereign relationships as between governments require the right incentives in order to choose mutually beneficial exchange over violent conquest (Anderson and McChesney, Reference Anderson and McChesney1994). From 1790 until the Civil War, relations were characterized by conflict punctuated by periods of renegotiation and subsequent reneging on treaty terms followed by more war. This shifting treatment emphasizes how the position of the American Indian with respect to the national political economy was at times one of direct opposition, and at times one of neglect. As and where Indian interests came up against the interests of the dominant coalition, they lost, whether through military conflict or treaties, including those initially recognizing land that were subsequently renegotiated (as in the case of the Fort Laramie treaties recognizing and then restricting territory of Plains Indians). The process was not monolithic. When it came to vacating more valuable settled lands in the East, the federal government had the incentive to offer land to the West, but under subsequent administrations when this land became more valuable due to ongoing settlement, railroad development, or mineral deposits, federal political economic objectives once again cut against the interests of the American Indian.
The taking of American Indian property proceeded by executive (administrative), judicial, legislative, and military means. The federal government engaged in systematic administrative and judicial taking of property, as well as severely circumscribed procedural remedies before the executive and judiciary, thereby removing property at the time and creating obstacles to claiming that, while not eliminating judicial remedies, made the use of courts to reclaim property lost through treaties and federal policy more challenging. Early on in the nation's history, Federalists stoked fears of Indian warrior ferocity to argue for a stronger federal government and greater military capacity (Ablavsky, Reference Ablavsky2014), an aim which was largely realized when the Constitution granted Congress the power to regulate trade with the tribes (Prucha, Reference Prucha1994: 37). Laws such as the Trade and Intercourse Act of 1790 greatly circumscribed Indian economic liberty. Indian rights were further restricted by the Marshall Trilogy, three Supreme Court opinions issued between 1823 and 1832. These decisions diminished ownership and sovereignty rights on the part of American Indians (Johnson versus M'Intosh (1823); Cherokee Nation versus Georgia (1831)). In creating the paternalistic guardian–ward relationship between Indian tribes and the United States, this directly raised the question of what representation, if any, American Indian interests would receive within the government that was supposedly to serve as a steward of these groups. In Worcester versus Georgia (1832), the Supreme Court held Georgia could not enforce its laws within the Cherokee Nation and that Indian affairs were an exclusively federal matter. Nevertheless, President Andrew Jackson, who championed the Indian Removal Act 2 years earlier, refused to enforce the decision, an early signal as to the lacking extent to which Indian institutions, including those governing property, would receive reliable enforcement by the government after being made ‘wards’ of the state. The increased scarcity of available land, first in the east, and subsequently in the western territories and states, cut against Indian interests, at times incrementally through the operation of other settlement policies, and at times directly through the federal administration of Indian lands.
As a result, Cherokee and hundreds of other tribes were coerced onto reservations in the late 1830s, where white reservation superintendents were equipped with dictatorial authority in the management of their Indian wards (Crepelle, Reference Crepelle2019). Between removal from their homes and the Civil War, Indians made efforts to adapt to their new circumstances, but federal officials attempted to force Indians to farm in regions ill-suited for farming (Ostler, Reference Ostler2001). On reservations, tribes became dependent on the federal government, although the government's treatment fell observably short of the bare minimum needed for survival (McLoughlin, Reference McLoughlin2014). Indians' ‘dependency’ on the federal government was used by the Supreme Court to justify Congress's assertion of plenary power over Indians in US versus Kagama (1886) despite the Supreme Court's admission that there was no constitutional basis for it. Over the course of the 19th century and early 20th, the Supreme Court periodically gave legal cover to direct divestiture of lands obtained in earlier treaties (most notable in Lone Wolf versus Hitchcock in 1903), while barring Indians from bringing suits against the United States, absent an act of Congress approving it, until 1946 (McSloy, Reference McSloy1994). American Indians were both directly deprived of land as well as legal recourse before the courts surrounding US government action with respect to their land.
Legislation that further improved opportunities for settlers and improved the security of their property rights (such as preemption and homesteads, which although imperfect compared to cash sales nonetheless provided opportunities for complete title in fee simple) created pressure to renegotiate treaties to open additional lands. The Homestead Act encouraged settlement in the plains after the Civil War as a means of extending economic and territorial sovereignty. Although the federal government had a standing army after the Civil War, most of it was in the south for reconstruction (Bensel, Reference Bensel1990), and the remaining troops were spread out sparsely across the country in isolated forts, leading the government to choose homesteads as a way to reduce its costs of consolidation of control over territory (Allen, Reference Allen1991a). Furthermore, in the time of the railroad land grants, Congress made extinguishing Indian title an explicit priority of several of the railroad land grants, a mandate the ensuing administrations clearly heeded in practice due to the reductions in reservation lands surrounding the land grants (Edwards et al., Reference Edwards, Friefeld and Wingo2017).
Military taking, beyond the outright conflict and war that removed Indians, also included the destruction of their capital assets. The government recognized it could further secure western land sovereignty by facilitating the destruction of a chief capital asset of the plains Indians, the bison.Footnote 8 As a result of these activities of the government, along with increasing demand for bison hides (Taylor, Reference Taylor2011) and land for railroads (Hill, Reference Hill2014), bison herds declined from over approximately 50 million to barely 300 by the end of the 19th century (Crepelle and Block, Reference Crepelle and Block2016).Footnote 9 Military prowess played a role for Indian tribes as well, and stood as an alternative to trading, especially among tribes like the Comanche (Kavanagh, Reference Kavanagh1996). But similarly to the case of the bison, an integral capital input to the economy of a competing sovereign became a strategic target; the US Army's slaughter of the Comanche horse herd in 1874 led to the tribe's demise (Gwynne, Reference Gwynne2010: 282–283). Just as it came to land that the American Indians might have used productively, the government sought to extinguish another major productive natural resource base of the economies of Plains Indians at the time.
4.2 The continuity of dispossession and uncertainty
In this overall context of dispossession, certain treaties recognized substantial tribal lands, at least initially. The first Fort Laramie Treaty in 1851 recognized as Sioux lands a tremendous territory including the Dakotas and parts of Nebraska, Montana, and Wyoming in the hopes of reducing conflict ton the Great Plains. The government even promised to defend the tribes from US citizens and pay annuities if the treaty terms were upheld. Yet, such agreements were subjected to shifting political economic equilibria, including as a result of the behavior of settlers, including miners, who occupied Indian lands under the treaty (Edwards et al., Reference Edwards, Friefeld and Wingo2017: 105–107). In 1868, the second Fort Laramie treaty established a much smaller Sioux reservation, and white reformers supportive of the Dawes Act pushed for privatization of reservation land even when tribes opposed it (Bobroff, Reference Bobroff2001), thereby diminishing the ability for Indian land policy to provide certainty to economic actors on reservation, both at the time, as well as in expectation, given the chronic uncertainty to which these institutions were subject. Despite understandable Indian opposition, the Dawes Act in 1887 established a framework to break reservations into 160-acre sections for each head of household to remain in trust for 25 years, after which Indians were to be granted citizenship and become self-supporting farmers.
Opponents of the Dawes Act raised the specter of dispossession. Arguing before Congress in 1880, opponents of allotment argued its purpose was to open additional land for white settlement and to assimilate Indians into ‘American’ culture:
The real aim of this bill is to get at the Indian lands and open them up to settlement. The provisions for the apparent benefit of the Indian are but the pretext to get at his lands and occupy them. With that accomplished, we have securely paved the way for the extermination of the Indian races upon this continent. If this were done in the name of Greed, it would be bad enough; but to do it in the name of Humanity, and under the cloak of an ardent desire to promote the Indian's welfare by making him more like ourselves, whether he will or not, is infinitely worse.Footnote 10
The critics unsurprisingly proved correct, as the Allotment Act ended up dispossessing Indians of over 90 million acres of their best land out of 138 million originally allocated to them through treaties (Carlson, Reference Carlson1981). The reservation land as initially allotted to Indians had less gold and silver than surrounding land (Dippel, Reference Dippel2014), and the best land was reallocated to settlers, a further testament to the outcomes of the extant political economy for American Indian property institutions. Importantly, though, the application of the Act, which required granular administration of land title at the local level, was inconsistent, due first to delays in the implementation of the Act, followed by its eventual suspension in 1934. Interestingly, reservation land that was successfully privatized, and reservation land that was never subject to allotment (i.e. tribal land) both outperformed land that was partially subject to treatment under the trusteeship scheme (Dippel et al., Reference Dippel, Frye and Leonard2020).
The Allotment Act illustrates the broader point regarding chronic uncertainty that we display throughout our analysis here. Despite the Act's passage in 1887, the bulk of reservation land allotment only began to occur after the passage of a related act in 1906, which indicates nearly 20 years of uncertainty governing property institutions on reservation, despite the clear federal announcement of intent to allot land. As a result of the iterative implementation of the Act, some reservations had considerable allotment resultant in fee simple conversion, others had none, and still others had only partially begun allotment when administrative tides once again shifted and the process was halted altogether, resulting in the variance in land title on reservations that we discuss here. In addition, the stability of fee simple and reservation control of property institutions was lacking due to the ongoing treatment of American Indians by successive administrations since colonial times onward compared to non-reservation land. As problematically for institutional legitimacy, the Allotment Act was premised on coercive assimilation of Indians rather than peaceful multicultural coexistence.Footnote 11 The General Allotment Act was, in President Theodore Roosevelt's words, ‘a mighty pulverizing engine to break up the tribal mass’ (Carpenter and Riley, Reference Carpenter and Riley2019: 815). Thus, given the history we detail to this point, the conclusions of the Meriam Report which was published at the end of the Allotment period should come as no surprise to the reader.
4.3 From dispossession to bureaucratic control
Partially in response to the damning conclusions of the Meriam Report, the government responded with the Indian Reorganization Act (IRA) of 1934, which unlike the Dawes Act was premised on the notion that tribes should exist. The Supreme Court, in Mescalero Apache Tribe versus Jones (1973), noted that the IRA was designed ‘to rehabilitate the Indian's economic life and to give him a chance to develop the initiative destroyed by a century of oppression and paternalism’. Furthermore, as the Supreme Court noted in Morton versus Mancari (1974), the IRA contains provisions to promote tribal economic development and self-government, including ending the federal government's ‘overly paternalistic’ treatment of Indians. One of its key provisions was ending allotment, thereby putting an end to the transfer of land from Indians to whites, although the Act's freezing of property into highly fractionated trust lands had observable consequences that persisted until contemporary times (Frye, Reference Frye and Anderson2016). Yet, the IRA also struck a blow against self-governance compared to other quasi-sovereign entities such as state governments by forcing many tribes to adopt constitutions incompatible with their culture and by giving the Secretary of the Interior near-total control of tribal life (Crepelle, Reference Crepelle2019). Thus, although some constitutions were a reasonable fit with local tribal conditions (Cornell and Kalt, Reference Cornell and Kalt1995), many were poorly matched and adopted without much if any deliberation.
Although trusteeship enables tribes to preserve their land base as trust land, generally cannot be seized from creditors, is immune from state taxation, and income earned on trust land is exempt from state taxation (Crepelle, Reference Crepelle2020), its more general consequence is to add costs to economic activities in Indian country (Miller, Reference Miller2012, Reference Miller2018). The trouble with trust status is the complex federal bureaucracy that encumbers it, thereby reducing Indians' ability to find the most efficient use of their land even today (Russ and Stratmann, Reference Russ, Stratmann and Anderson2016). The IRA established rules that continue to severely restrict alienability of property (Shoemaker, Reference Shoemaker2016). Limited alienability complicates the mortgage process; in fact, mortgaging trust land requires the approval of the Secretary of the Interior, increasing the burden on owners to use their land as collateral.Footnote 12 Land held in trust is also subject to fractionation, which is a problem of tenancy in common (with restrictions on alienability) rather than incomplete assignment of property rights. Although common law favors partition or sale when multiple parties inherit the same parcel, Section 5 of the Dawes Act required that heirs received undivided interests (Sawers, Reference Sawers2009), resulting in ownership interests passing down through the generations producing ever-smaller ownership interests. According to the Supreme Court in Hodel versus Irving (1987), Indian trust lands averaged over 100 co-owners for each plot of land in some parts of Indian country. According to the Court, ‘Because the land was held in trust and often could not be alienated or partitioned, the fractionation problem grew and grew over time’. The result is an anticommons problem: excessive assignment of private property rights undermines the value of an asset (Heller, Reference Heller1998), even if the parcel itself is a reasonable size (Shoemaker, Reference Shoemaker2014). Fractionation renders Indian property, in de Soto's (Reference de Soto2000) terminology, dead capital, though the problem is not simply in the institutional constraints on particular parcels of land: the defects in any given parcel of land frustrate the necessarily coordinative reassembly of land (Alston and Smith, Reference Alston and Smith2020), as there is not an easy way for contracting parties to assemble plots of fee simple as many reservations within any specific location have a combination of fee simple, tribal, and trust land.
4.4 Conflict over authority to determine ownership of property
Following World War II, the federal government once again pivoted sharply, this time from a policy of limited self-determination to legislating tribal governance out of existence. These policies, referred to collectively as the Termination Era, were meant to eliminate reservations and tribal identity (Williams, Reference Williams1986). Tribal governance institutions were further disrupted by Public Law 83-280 (PL 280) which extended state criminal jurisdiction and civil adjudicatory jurisdiction over reservations in six states. Although PL 280 may have improved resolution of civil cases (Anderson and Parker, Reference Anderson and Parker2008; Brown et al., Reference Brown, Cookson and Heimer2017), the law displaces tribal policing and PL 280 jurisdictions have higher crime rates than reservations in non-PL 280 states (Twetten, Reference Twetten1999). Additionally, PL 280 expressly forbids states from taxing tribal lands, and does not provide additional funding for law enforcement,Footnote 13 which makes PL 280 an unfunded mandate (Goldberg and Valdez, Reference Goldberg and Valdez2008).
In his Special Message to the Congress on Indian Affairs on July 8, 1970, President Nixon formally declared an end to the Termination Era by acknowledging the many injustices committed against Indians and that even well-intentioned federal Indian policies had ‘frequently proven to be ineffective and demeaning’. A more limited vision of Nixon's self-determination proposal became law in 1975 as part of the Indian Self-Determination and Education Assistance Act (Prucha, Reference Prucha1995: 379–380). Even with self-determination, many tribes still struggle economically (Kalt and Singer, Reference Kalt and Singer2004). The federal government still asserts control over many aspects of Indian economies, including property institutions. Individuals are thus still subject to uncertainty in the face of shifting political economic equilibria in the future, especially given the legacy of centuries of poor treatment. Economic development on reservation thus requires both improvements in the specific defects property institutions suffer from today, but also a credible commitment on the part of the federal government to ongoing stability in the broader institutional fabric that undergirds economic actors' decisions to engage in coordinated investments over time. The following section considers specific defects with property institutions, as well as broader issues affecting the stable administration of Indian property institutions in an ongoing sense.
5. Obstacles to the evolution of property institutions on reservations
Despite some benefits for tribes, trust land comes with significant burdens such as complex and burdensome federal regulations that make entrepreneurship much more costly on reservations (Miller et al., Reference Miller, Jorgensen and Stewart2019). Although tribal land ownership and sovereignty are currently intertwined, this does not have to be the case as non-Indians who purchase land within a reservation could easily be subjected to tribal law (EagleWoman, Reference EagleWoman2009). Conditioning which law applies on the ownership status of the land and whether an individual is an Indian increases the transaction costs of engaging in productive economic activity using resources on reservation. Tribal sovereignty is more meaningful than it has been in the past 200 years (Washburn, Reference Washburn2016: 207); nevertheless, tribes' sovereignty over their land and economic activities occurring on it remains aspirational across a number of dimensions.
Constraints on the free determination of property institutions by tribes are compounded by rules that impose different burdens on Indians that the federal government does not apply to other groups and quasi-sovereign entities in the United States. One issue that has emerged due to the complexity of the institutional history on reservation (due to Supreme Court precedent) is that different laws apply based upon whether a person is an Indian or not (Anderson and Parker, Reference Anderson and Parker2008). Further complications arise as a result of dozens of definitions of the legal term ‘Indian’ in federal code, case law, and tribal codes (White et al., Reference White, Stoner and White2008). Another issue is that tribes are precluded from establishing a substantial revenue base. Although states cannot tax trust land itself, states can tax commerce that occurs on tribal trust land if people other than citizens of the tribe are involved in the transaction. This effectively prohibits tribes from collecting taxes because no one wants to pay both a tribal and state tax when the tribal tax can be avoided by stepping off the reservation (Crepelle, Reference Crepelle2020). The problem is further compounded by a lack of business activity, which undermines tribal revenue. Thus, even if we view the tribal governments as subjected to federal oversight like other quasi-sovereign units (such as state governments), Indian reservations face additional constraints.
A larger institutional challenge is that many tribes still operate under culturally incompatible IRA constitutions imposed on them by the federal government. Cornell and Kalt's (Reference Cornell and Kalt1998, Reference Cornell and Kalt2000) finding that separation of powers is as important in Indian country as anywhere else, especially to limit corruption, remains significant. For example, those tribes that have successfully formed a strong and independent judiciary have stronger economies (Crepelle, Reference Crepelle2019).
Even with removal of federal regulations on Indian economies, there remain political and legal challenges to the creation of more effective property institutions on Indian reservations. The effectiveness of legal rights depends in part on administrative capacity and political constraints on sovereign tribal governments, as well as judges and lawyers with expertise in Indian law, police who are accountable for tribal citizens, and meritorious tribal bureaucrats. Indians may choose private property rights with greater self-determination. Our analysis suggests that the challenges remain of building political and legal autonomy and capacity to enable greater self-determination of property institutions. The gains from doing so are potentially immense. Entrepreneurial economic actors (whether American Indian or no) can be deterred from making productive investments due to chronic uncertainty created by decades of mistreatment under the extant political economies of the time. But the question remains whether the predatory state can credibly commit to a durable new institutional equilibrium on reservation. Our argument would suggest that the stability associated with credible state commitment is central to determining long run economic outcomes (Broadberry and Wallis, Reference Broadberry and Wallis2017), in addition to the specific institutional challenges that any given reservation may be facing.
Taken together, these results suggest that greater self-determination of land on the part of economic actors would improve tribal welfare, as tribal land and fee simple each increase investment incentives compared to the more paternalistic trust land system. Getting there is no small task, though, for changes in institutions must not only address the specific institutional defects we enumerate here, but also must provide a more stable institutional firmament in order to give economic actors the confidence that their investments today will not be upended by future changes in political economic equilibria, whether on reservation or at the federal government level. The history we detail here does not lend itself to such an optimistic vision of the future.
6. Conclusion
Institutional analysis of property systems often (and sometimes by necessity) considers internally diverse groups as unitary. Acemoglu and Robinson (Reference Acemoglu and Robinson2019) use the United States as an example of a country that falls in the narrow corridor of political and economic liberties. This sentiment captures the federal government's broad administration of settlers' rights to the land they productively settled over the course of the 19th century. Despite the fact that this process was messy, and not without its own political controversies (such as the decades-long conflict over squatters' rights and later homesteads), settlers nonetheless undertook the costly and risky venture of settling undeveloped areas in the West despite short-term deficiencies in property institutions. This directly suggests settlers were confident in their long-run ability to secure title despite these deficiencies.
But this broad characterization neglects the contrasting institutional treatment of American Indians over the same period. The empire of private property for settlers contributed to wealth creation at the cost of dispossessing Indians of their land. The Dawes Act and later Indian Reorganization Act constituted a succession of political economic equilibria that eroded productive investment incentives on American Indian lands. After his Nez Perce tribe was defeated in the Indian Wars, Chief Joseph traveled to Washington, DC, in 1879, to speak of freedom: ‘Let me be a free man, free to travel, free to stop, free to work, free to trade where I choose, free to choose my own teachers, free to follow the religion of my fathers, free to talk, think, and act for myself’. Chief Joseph understood that the dominant political economic equilibrium perpetually advantaged settlers vis-à-vis Indians, whose rights have always been deficient in terms of the extent they would be respected under future administrations. The situation has not changed nearly enough since Chief Joseph made his plea for freedom.
Recent institutional scholarship illuminates the relative efficiency of fee simple and tribal control of land as compared to greater levels of government control on reservation lands. Such analysis cannot be separated from the broader political economy of property institutions if we want to understand the chronic underdevelopment of American Indian reservations. Settlers were dynamic beneficiaries of government policy in nearly all relevant periods, especially compared to American Indians, whose property institutions were strictly weaker as settlers expanded their rights, even in those instances where specific institutional treatment on reservation approached what we deem private property ‘rights’. Thus, conceptualizing the frontier experience as property protection for settlers (albeit imperfect) and property insecurity for Native Americans is a necessary starting point for conversations about the evolution of American Indian property institutions.
Acknowledgements
Many thanks to the three referees for exceptionally useful comments. We also benefitted immensely from comments from seminar participants at the Searle Workshop on ‘Indigenous Capital, Growth, and Property Rights: The Legacy of Colonialism’, Hoover Institution, Stanford University, November 2019: Dominic Parker, Terry Anderson, P.J. Hill, Donna Feir, Christian Dippel, Wendy Purnell, William Snipp, Bryan Leonard, Joseph Austin, Daniel Stewart, Robert Miller, Dustin Frye, Bruce Johnsen, David Scoones, Marc Roark, and Dwight Newman. Geoffrey Hodgson and the associate editors offered valuable suggestions on how to frame the paper.
