Institutions, property rights, and transaction costs in the hardrock mining industry, 1866-1996

A large percentage of US mineral production comes from western lands that were once, or are now, in federal stewardship. Since 1872 the location system of the General Mining Law has defined the rules by which rights to these lands are transferred from public to private interests. The location system is a product of the informal and formal institutions that miners implemented during the great western metal rushes of the mid-19th century. The system allows miners to explore for minerals and to establish property rights on federal lands without prior government authorization. Opponents of the law argue that the private discretion afforded by self-initiation imposes high government costs of monitoring private activity, and that the current system lacks adequate environmental-protection provisions. Under the principal proposed alternative--discretionary leasing--the government would maintain discretion over mineral access. In this dissertation I address two general questions related to the General Mining Law. First, what are the implications of the law in the context of contemporary industrial conditions and land-management practices? Second, why is the law still in place, and how have the machinations of the law changed since its enactment? To answer these questions I develop and apply a framework that emphasizes the role of institutions, property rights, and transaction costs in federal land management. Part I develops this theoretical framework and applies it in the contemporary context. The analysis demonstrates how alternate institutional arrangements affect the level and distribution of costs across private and public interests, by comparing the contemporary costs of the location and lease systems. While Part I provides a snapshot of contemporary costs associated with the law, in Part II contains three chapters that empirically examine the dynamics of the law and shows how federal land interests--the mining industry, land administrators, lawmakers, environmental interests--have organized and reacted to the incentives and constraints imposed by the law since 1872. Data on claims conflicts shows that private contracting efforts and common-law changes facilitated industry's adaptation to these changes, and also shows how private and government transaction costs affect the value of titled and untitled mining claims. In the final chapter I focus on the causes and consequences of institutional change since 1872, and discuss the implementation of the Federal Land Policy Management Act in 1976, and the wilderness system beginning in 1964.