Assessing the relative allocative efficiency of the Native Title Act 1993 and the Aboriginal Land Rights (Northern Territory) Act 1976

Economic analysis indicates that a socially optimal level of mining may not be occurring under the Aboriginal Land Rights (Northern Territory) Act 1976 (ALRA). This paper suggests that this is either because transactions costs are hindering negotiations between miners and Aborigines or because some strategic behaviour problem is present. This paper discusses whether the mining provisions of the Native Title Act 1993 (NTA) have, at a statutory level, the potential to overcome the difficulties evident in the ALRA's operation. It is argued that transactions costs will probably be less under the NTA than under the ALRA and that a liability rule is likely to be more efficient than a property right as transactions costs increase. This suggests that the ALRA is inefficient compared to the NTA. The merits of arbitration in an environment of strategic behaviour, which is generally better disciplined by a liability rule, are also discussed. The general conclusion is that the NTA has the potential to lead to more efficient outcomes than the ALRA. Definitions of technical economic terms used in this discussion paper can be found in the glossary at the end of the paper