A Hypothesis of Wealth-Maximizing Norms: Evidence from the Whaling Industry

This essay analyzes the rules that high-seas whalers used during the heyday of their industry to resolve disputes over the ownership of harvested whales. The evidence presented sheds light on two important theoretical issues of property rights. first issue is the source or sources of property rights. According to what Williamson calls the "legal-centralist" view (1983: 520), the state is the exclusive creator of property rights. Many scholars, including Thomas Hobbes (1909: 97-98), Garrett Hardin, and Guido Calabresi (1972: 1090-91), have at times succumbed to legal-centralist thinking. An opposing view holds that property rights may emerge from sources other than the state-in particular, from the workings of nonhierarchical social forces. The whaling evidence refutes legal-centralism and strongly supports the proposition that property rights may arise anarchically out of social custom. second theoretical issue is whether one can predict the content of informal property rights (norms) that informal social forces generate. This essay advances the hypothesis that when people are situated in a close-knit group, they will tend to develop for the ordinary run of problems norms that are wealth-maximizing. A group is "close-knit" when its members are entwined in continuing relationships that provide each with power and information sufficient to exercise informal social control. A norm is "wealth-maximizing" when it operates to minimize the members' objective sum of (1) transaction costs, and (2) deadweight losses arising from failures to exploit potential gains from trade. This theory of the content of norms is proffered as the most parsimonious explanation of variations among whaling rules.