Gold Rush Legacy: American Minerals and the Knowledge Economy

This paper argues that the discovery of gold in California and a federal policy that gave all of the rents in minerals on federal land to private parties led to two important, and closely related, outcomes. The first outcome was the development of a private-order property rights regime in the gold mining region, key elements of which would later be adopted as federal law. This regime, often considered a canonical example of the emergence of private-order property rights, protected the rights of active users of goldbearing land. As Umbeck (1981) documented, the rights and responsibilities of miners in a particular area were memorialized in a mining district code, which defined who could hold rights, what the rights were, and procedures for transferring rights. These codes and associated norms were successful at controlling violence and so allowed miners to focus the bulk of their energies on mining. Mining district codes also included provisions for the reallocation of rights of inactive users, through claim jumping. In Clay and Wright (2005), we argue that mining claims were not secure property rights as that concept is conventionally understood. This insecurity was in a sense built into the system, in that district codes gave considerable attention to the rights of claim jumpers, individuals who took over a claim deemed to be abandoned. Far from being a violation, ―claim jumping‖ brought productive land into use and was the most common method of acquiring a claim. Thus, codes both protected production on existing claims and regulated access to mining sites in a competitive race for high-value deposits.