Law and Economics Classics - Ellickson Goes Whaling
At Grove City College, I teach Law and Economics--a course that explicitly examines how "people expand their options by cooperating." It therefore lies at the heart of "mere economics." In this sermon series, I'll be posting a summary of classic L&E papers over the coming weeks.
Ellickson, Robert C. "A hypothesis of wealth-maximizing norms: Evidence from the whaling industry." Journal of Law, Economics, and Organization 5 (1989): 83-97.
The most fun paper on this list, and also criminally under-cited relative to its quality. It asks a critically important question: What is the source of property rights? The “legal centralist” tradition sees the state as “the exclusive creator of property rights.” Another tradition sees property rights emerging from “the workings of non-hierarchical forces.” Ellickson not only adopts this second view, but also makes the tougher case that norms which emerge are “wealth-maximizing.”
To argue these points, he examines the practices of Greenland and New England whalers from 1750 to 1870. As context, whaling communities tended to be tightknit (thus allowing informal enforcement to operate) and there was no maritime law which governed how one came to have rightful possession of a whale. There are many hypothetical rules that could govern who owns which whale. It turns out that the rules which emerged were well-suited to the particular challenges each group of whalers faced. Among British whalers, a “fast-fish, loose-fish” rule emerged. Under this rule, an unbroken line between harpoon and boat established ownership. This rule rewarded the ship which was the first to harpoon a whale, the most challenging part of the hunt. Furthermore, the right whales hunted in this region were sluggish and unlikely to break the line.
By contrast, American whalers converged on a different rule—”iron holds the whale.” Under this rule, the first harpooner of a whale was its owner, regardless of whether the line remained unbroken. Sperm whales were vicious fighters who often broke the line, but this rule incentivized getting one’s harpoon into a whale, which was no easy task. As mentioned, these rules emerged “spontaneously” and they worked remarkably well, as evidenced by the low degree of litigation over whale ownership.
The paper is a great example of pursuing research in the “Mengerian” tradition which asks:
- “How can it be that institutions which serve the common welfare and are extremely significant for its development come into being without a common will directed toward establishing them?”
For more on rules outside the formal legal system, see the most-cited classic by Lisa Bernstein: “Opting out of the legal system: Extralegal contractual relations in the diamond industry.”
